SWITZERLAND - Swiss bank UBS saw net outflows of CHF2bn (€1.22bn) for its asset management business for the first half of 2007, as institutional clients withdrew CHF2.5bn in the same period.
CHF1.5bn of the institutional outflow in UBS' asset management business can be attributed to "the redemption of Dillon Read Capital Management outside investor interests", the bank noted in its half-year report.
UBS had to close its hedge fund venture Dillon Read (DRCM) following severe losses earlier this year and, in the wake of this shut-down, the bank replaced chief executive Peter Wuffli with his deputy Marcel Rohner in July.
The DRCM closure also led to an 80% drop in pre-tax profits for the asset management business of the Swiss bank as profits stood at CHF66m at the end of June 2007 compared to CHF334m a year ago.
"Excluding these costs, pre-tax profit would have been CHF450m," UBS pointed out, with the firm adding: "stronger performance fees, particularly in alternative and quantitative investments and the Brazilian asset management business, contributed to the increase".
Institutional revenues were CHF642m in the second quarter of 2007, up from CHF585m in Q1 2007, "reflecting stronger performance fees from alternative and quantitative investments and the Brazilian asset management business" but again offset by costs involving the closure of DRCM.
Total operating expenses also exceeded CHF1bn in the second quarter, including CHF384m in costs relating to the DRCM shutdown, whereas operating expenses reached CHF593m in the first three months of 2007
Net outflows from equity mandates were partly offset by inflows into multi-asset mandates, alternative and quantitative investments as well as real estate.
Nevertheless, UBS Asset Management saw outflows of CHF2bn compared to an inflow figure of CHF3.6bn for the first-half of 2006 and inflows from institutional investors were down CHF11.8bn.
This institutional outflow was mainly offset by strong inflows into the wealth management business as net new money for the whole group was at CHF86.8bn, up CHF2bn a year earlier.