UBS pins hopes on new standards in portfolio performance
Portfolio performance of asset management divisions is the key to the future of Swiss banking, now that they are scaling back their investment banking divisions in favour of asset management as their core source of revenues.
Alexander Friedman, chief investment officer at UBS, said in an interview with Bloomberg: “There used to be this moat that created a great business model for Swiss banks – it’s gone.”
Friedman, appointed in March 2011, said: “The core of this place is wealth management. So unless we outperform as investment managers, the business model has to come up with something new.” Investment performance, he said, is “a deep moat – that’s a sustainable moat, if you build it right.”
Friedman said his ambition is to build an investment management business that is “better than any other”.
UBS manages client assets of $1.58trn but, as one of the largest players in the asset management industry, it faces growing competition from rivals for this business. Since 2007, UBS has seen a 28% loss of assets under management. Net new assets in the first half of this year for UBS’s two wealth divisions reached Sfr24.1bn, the highest six-month total since the sub-prime crisis.
About 90% of UBS’s wealth customers outside the Americas saw positive returns on their portfolios after fees in the first seven months of this year, Friedman told Bloomberg. UBS said the average performance among 80,000 discretionary portfolios was positive in all strategies and in some cases as high as 12%.
First half revenues from wealth management outside the Americas fell 7.4% to Sfr3.5bn ($3.6bn) from last year, but the division remains the biggest earnings contributor at UBS. Revenues from the Americas were up 11%, and pretax profits rose 55% to Sfr390m.