Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
Marketwatch – The IRS last week reached an agreement with the Swiss government and UBS AG that will result in thousands of Americans who thought they had a secret Swiss bank account having their names and account details turned over to U.S. tax authorities.
Former UBS banker Bradley Birkenfeld was sentenced to 40 months incarceration on Friday after he pleaded guilty to defrauding the United States. Birkenfeld admitted to advising U.S. clients to place cash and valuables in Swiss safety deposit boxes, destroy off-shore banking records and file false U.S. income tax returns, among other frauds.
CNN Money – John Costas, who helped make UBS AG into one of the world’s biggest investment banks, wants to build a lasting Wall Street player — and put the 2007 demise of hedge fund Dillon Read Capital Management behind him.
Costas and long-time partner Michael Hutchins have launched The PrinceRidge Group, a boutique broker-dealer that is, for now, focused on trading mortgage and corporate debt.
Over time, though, he intends to expand into a mid-size investment bank, seizing "unprecedented" opportunities created by the shake-up on Wall Street.
Reuters Hong Kong – Credit Suisse on Wednesday said a top UBS AG prime brokerage banker will join the bank as head of prime services for Asia-Pacific, based in Hong Kong.
Since 2007, Matt Pecot was the Americas head of prime brokerage services for UBS, having held a similar Asia-Pacific role with UBS from 2004 and 2007.
Credit Suisse, under less financial pressure than rival UBS, is in a position in Asia and elsewhere to poach top bankers from its peers.
Reuters Zurich – UBS AG is considering selling all or part of its hedge funds business Alternative & Quantitative Investments in a management buyout, a Swiss newspaper reported on Tuesday.
Citing unnamed financial sources, the Neue Zuercher Zeitung said a management buyout offer for A&Q, or parts of it, was on the table, which the newspaper said would fit into the bank’s strategy of focusing the bank and cutting its risks.
Bloomberg – U.S. hedge funds are buying more of the nation’s stocks than they’re selling for the first time since October, while mutual funds and most other investors remain net sellers, according to UBS AG.
In the four weeks ended March 13, net purchases of equities by hedge fund clients of UBS averaged $140 million, according to a March 18 report by David Bianco, the New York-based chief equity strategist at Switzerland’s biggest bank. The inflows into stocks followed 22 straight weeks of outflows.
“Those who are supposedly experts at assessing and managing risk are more confident putting capital to work than they were in October and November,” said Peter Kenny, managing director in institutional sales at Knight Equity Markets LP Jersey City, New Jersey. “That’s an indication that the market has made some constructive moves toward building a base.”
Bloomberg – UBS AG, Switzerland’s largest bank, nominated former Finance Minister Kaspar Villiger as chairman of its board of directors, replacing Peter Kurer after one year amid a probe into whether it helped wealthy Americans evade taxes.
Kurer’s departure comes less than a week after UBS called former Credit Suisse Group AG Chief Executive Officer Oswald Gruebel, 65, out of retirement to replace CEO Marcel Rohner. Villiger, 68, will step down from board positions at Swiss Reinsurance Co, Nestle SA and Neue Zuercher Zeitung if elected by shareholders on April 15, the Zurich-based bank said today.
UBS is being sued by the U.S. over the names of as many as 52,000 clients, after agreeing last month to hand out details of a few hundred customers to avoid prosecution on a charge that it helped rich Americans dodge taxes. The bank is cutting 11,000 jobs after more than $50 billion in losses from the credit crisis, and clients withdrew $195 billion of assets last year.
“This is a clean slate,” said Christian Stark, an analyst at Credit Agricole Cheuvreux in Zurich who has an “underperform” rating on the stock. “Villiger hasn’t got the banking experience, but his political background may be useful in dealing with the U.S. and European Union.”
UBS rose 37 centimes, or 3.7 percent, to 10.26 francs by 1:02 p.m. in Swiss trading. The bank has lost 84 percent of its market value in the past two years and posted the biggest ever loss by a Swiss company earlier this year.
Bloomberg - John Costas and Michael Hutchins, are reuniting to start a financial services firm after running UBS AG’s hedge fund Dillon Read Capital Management LLC, according to people familiar with their plans.
Costas, 52, took over UBS’s investment bank in 2001 and spun off the proprietary trading desk to form Dillon Read in 2005. Zurich-based UBS shut down the unit in May 2007 and said it accounted for $3 billion of the $19 billion in losses the bank reported that year. Hutchins, 53, was president of Dillon Read and previously headed the debt unit of UBS.
New York (HedgeCo.Net) – UBS AG will pay $200 million to settle the SEC charges that the Swiss Bank acted as an unregistered broker-dealer and investment adviser.
According to the original compliant, UBS helped certain U.S. individuals to set up and maintain undisclosed Swiss bank accounts, which enabled these clients to evade U.S. taxes. In addition, UBS acted as an unregistered broker-dealer and investment adviser from 1999 to 2008, to thousands of U.S. clients while holding billions of dollars in assets for them. UBS allegedly raked in profits of up to $140 million a year from this business.
“UBS avoided compliance with U.S. securities laws for many years, at the same time they were engaged in other illegal conduct, which makes this one of the most egregious cases of its kind," said Scott W. Friestad, Deputy Director of the SEC’s Division of Enforcement in a recent press release.
The SEC alleges that UBS was fully aware that it was required to register with their agency. They believed that UBS lured clients by sending them to exclusive events such as art shows, yacht outings and sporting events, all sponsored by the bank. In addition, client advisors who traveled abroad to the U.S. were given encrypted laptops and were trained on how to avoid detection by authorities.
In addition to the $200 million fine, UBS will settle criminal charges with the Department of Justice in which they will pay an addition fine of $180 million, and another $400 million in tax-related payments.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Bloomberg – Hedge-fund assets will likely drop by about $192 billion this quarter after the industry posted record losses in 2008, according to estimates by UBS AG.
Global assets will likely fall to $1.215 trillion in the first quarter, said Timothy Bell, London-based head of hedge- funds advisory at UBS’s wealth management unit. Hedge-fund investors withdrew a record $152 billion in the fourth quarter, pushing industry assets to $1.407 trillion at the end of 2008, according to Hedge Fund Research Inc.
“That trend is going to keep going certainly till the end of this first quarter,” Bell told reporters in Singapore today. “Trust will be reestablished by mid-year, provided the hedge fund industry does what it’s meant to do; January was a shining example of the lack of correlation.”
West Palm Beach (HedgeCo.net) – Swiss bank UBS AG’s money manager, Luxalpha, was one of the main European hedge funds that gave money to US money manager Bernard Madoff, it is now being shut down by CSSF, Luxembourg’s financial supervisors.
The Luxalpha assets were frozen in January, in what appears to be the first court action in Europe. Another private investor in a second UBS-run feeder fund, Luxembourg Investment Fund-US Equity Plus, is also considering legal action against the Swiss bank.
People with knowledge of the situation claimed that the two Luxembourg funds were not actively marketed by the bank and were set up at the request of clients to send money to Madoff. One of the Luxalpha board members, Rene-Thierry Magon de la Villehuchet, committed suicide in December after loosing $1.4 billion in his Madoff investments.
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West Palm Beach (HedgeCo.Net) – One month after Appaloosa Management backed out of a $2.55 billion deal to help lift Delphi out of Chapter 11, the Troy auto parts supplier is suing the hedge fund for damages.
"Our efforts to emerge were seriously undermined when we failed to close because of the actions of Appaloosa and the other plan investors. We hold them accountable for the harm they have caused to Delphi and our stakeholders," Delphi’s David Sherbin said in a statement on Friday.
Appaloosa, along with other big names like Goldman Sachs, Harbinger, UBS, Merrill Lynch and Pardus, were all part of a commitment to rescue Delphi, and had planned to give the company a big chunk of the $6.1 billion needed to refinance. But as the April 5th deadline got closer, more and more issues sprung up that made it seem increasingly unlikely that the Delphi was going to close the deal.
Appaloosa continued to assure shareholders that were not going to walk away, saying that if they had wanted to, they would’ve done so by now. One day before the deadline, Appaloosa finally turned its back, saying that Delphi had breached several agreements, and were becoming too reliant on former parent company GM, who also promised a $2.8 billion piece of the puzzle.
“Delphi believes that defendants backed out of the transaction simply because they decided they did not like the economics of the deal they had agreed to, and that they never intended to close if the deal was underwater," the company said.
This lawsuit isn’t the first that Delphi has waged against Appaloosa. Earlier this year, Delphi accused management at the hedge fund of short-selling their stock, with the anticipation that they knew the exit deal would fall through.
The amount in damages that Delphi is seeking has not been disclosed.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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