UBS Hong Kong headquarters
Swiss bank UBS is growing its prime brokerage unit. It has hired 11 new employees in Asia in the last year, and has expansion plans in the U.S. This is in addition to its London-based managed account business that stresses transparency and liquidity as compared to other alternative investments.
“We’ve bulked up our staffing and our resources in the region,” Stu Hendel, head of UBS global prime broking business, told reporters. Besides Asia, the UBS will try to increase its market share in the United States, where it currently ranks sixth, and will soon announce a top banker to head the Zurich-based hedge fund business, Hendel added.
Hendel had survived 18 years at Morgan Stanley, which ranks alongside Goldman Sachs as the top two prime brokers in the United States, joined UBS in July last year. “We have hired about 11 people in the last year,” said David Gray, head of UBS prime brokerage in Asia, adding the hires included specialists in areas such as information technology and law.
Singapore and Hong Kong are seeing an increase in hedge fund activity as global funds move to Asia, attracted by the region’s strong economic growth and lighter regulation at a time when Western countries are looking to tighten control over the industry.
Hendel said the bar to start a new hedge fund has gone up to $100 million in the United States from $25-$50 million before the financial crisis, and warned that smaller startups will find it hard to attract investor money. He said established hedge funds have not been forced to cut fees despite the noise around the issue even as the industry struggled to make double-digit gains in each of the last three years.
Hedge funds typically charge a management fee of 2 percent or sometimes more on assets — well above the fee charged by mutual funds — plus 20 percent of returns above a pre-agreed benchmark. But Hendel said fund of hedge funds managers are already facing investor pressure to cut fees.
“First it is going to hit fund of funds. I think it already has because of the added level of management and performance fees coming out of the relatively muted hedge fund environment,” he said. Hendel also warned that if European regulations change dramatically, hedge funds will move out of key money management centers in Europe such as London to places like Geneva and Asia.
“Some hedge funds have moved from the U.K. to Geneva and other places outside the main money centres but it is a trickle,” he said. “The whole regulatory environment is the huge elephant in the room when it comes to hedge funds.” France, Britain and the United States have been embroiled in a months-long dispute about a draft European Union law to tighten controls on hedge funds and private equity firms.
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Azentus Capital, expected to be among the largest hedge fund launches of the year, has recruited a trio of brand-name prime brokers to handle its trades.
