CNBC- Swiss bank UBS moved towards closing its Dillon Read Capital Management hedge fund arm in a shock move and said first quarter net profit at the bank declined,falling short of expectations.
UBS said on Thursday its investment banking division was reintegrating Dillon Read Capital Management (DRCM) portfolios and that third-party funds would be redeemed, effectively winding up the business.
“Operating a proprietary trading platform outside the investment bank and managing client money alongside became too complex and expensive,” Chief Executive Peter Wuffli said in a statement. “The DRCM initiative did not meet our expectations.”
It was the latest blow for UBS which has worried investors after ramping up costs in an acquisition drive.
Net profit was 3.275 billion Swiss francs ($2.71 billion) in the first quarter, below the 3.40 billion franc average forecast in a Reuters poll, and compared with 3.50 billion francs in the first quarter of 2006.
Net new money in wealth management was 44.8 billion francs, well ahead of forecasts. Analysts had expected to see 31.8 billion francs in net new money.
UBS launched its alternative investments business, Dillon Read Capital Management, last year to great fanfare, putting the former head of its investment bank division, John Costas, at the helm and transferring traders and assets from its investment banking division.
