Half free

30 June 2005

As he currently runs the whole investment bank, it seems to prove the bank s point that to keep staff, you need your own hedge funds. The move looks economically smart for UBS. But it may not work as well as a retention mechanism as the bank hopes.

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John Costas is giving up leadership of UBS's investment banking activities to run a new inhouse hedge fund being established by the Swiss bank.

Costas has run the investment bank for five years. He will be replaced by Huw Jenkins, currently global head of equities.

Dillon Read Capital Management will assume responsibility for running part of the bank's fixed income trading business. It will also seek funds from third party investors.

UBS chief executive Peter Wuffli said the bank had established the fund as a way both to extend the life cycle of traders who might otherwise be lost to hedge funds, and also to build a new fee earning business.

UBS is transferring its credit arbitrage activities to DRCM together with 120 staff. The business being transferred was responsible for roughly 20% of the firm's $4bn of trading income last year.

UBS will own 100% of the fund, which will be part of its Global Asset Management division.

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