07/22/2009

UBS' Troubles Hinder Search for Unit Head

Amid huge writedowns and regulatory issues, UBS has struggled to fill the top job in its prime-brokerage unit following the defection of Alex Ehrlich to Morgan Stanley.

After Ehrlich left in May, UBS apparently told employees it would name a new global head of prime brokerage by July 1. The word on the street is that UBS so far has been unable to lure top talent because of concerns about the bank's financial strength and demands by U.S. authorities that UBS disclose the names of thousands of private-banking clients. Another issue: The bank's apparent reluctance to offer a long-term contract.

"They don't have the luxury of time," one market player said, noting that the firm's client balances have dropped 50% from their 2007 peak of around $286 billion.

By leaving the top job vacant for too long, he said, UBS risks giving the appearance that it is no longer committed to prime brokerage. UBS declined to comment.

The bank's prime-brokerage business - which Bernstein Research recently ranked fourth in terms of market share behind J.P. Morgan, Goldman Sachs and Morgan Stanley - is temporarily being run by Dan Coleman, the global head of equities. The global head of prime brokerage reports to Coleman.

In the U.S., John Laub runs prime brokerage for UBS, while Marina Slowey oversees Europe. Laub is thought to be a candidate for the top job, though it appears the bank has focused its search so far on outside candidates.

Given the issues facing the Swiss bank, it's unclear how much attention prime brokerage will get from the home office. Since the credit crisis began in 2007, UBS has been forced to take a combined $52.8 billion of writedowns as of May. Separately, the bank is fighting with U.S. authorities over the release of 52,000 names of private-banking clients who may have committed tax fraud.

Prospective candidates also are concerned about the bank's reluctance to commit to a multi-year contract. The global head of prime brokerage at a top bank can expect to make at least $5 million a year, and most would want time to reach such performance benchmarks as revenue growth and market share.

UBS' prime-brokerage business was built via the acquisitions of brokerage house PaineWebber and the prime-brokerage unit of Dutch bank ABN Amro, which was known as an aggressive pursuer of smaller accounts with potential for rapid growth.

Ehrlich was hired by UBS in May 2003 from Goldman Sachs. He led an ambitious growth push, heavily investing in technology and aggressively marketing to hedge fund managers. In 2008, UBS' prime-brokerage business stood at about 1,000 clients globally, according to a March 2009 report by Bernstein Research.

Ehrlich isn't the only prime-brokerage executive to leave UBS in recent months. Matt Pecot, formerly head of prime-brokerage sales in the U.S., left earlier in the year to join Credit Suisse. He is now heading Asia operations from Hong Kong. Meanwhile, Clark Hutchinson and Bill Templer, who headed UBS' exchange-traded derivatives desk, are leaving to join Ehrlich at Morgan Stanley.

Back Print