Swiss-owned fund manager, UBS, has paid dearly for the loss of high profile manager, Paul Fiani, and some of his workmates at its flagship Australian Share Fund, over the last few months.
The loss of Fiani and other managers in recent months has been behind Standard & Poor’s decision to halve the rating of UBS’s key Australian Share Fund from from four to two stars yesterday.
Funds management is claimed to be a major business worldwide for the bank, so the downgrade and comments by S&P will hit hard.
Fiani and Balanced Equity’s Andrew Sisson are known as “the men who sank the Qantas bid”, a reference to their strong opposition which led to the $11.1 billion dollar Macquarie Bank-driven bid for the airline failing in early May.
Fiani left UBS shortly after amid stories that he was “paying” for his opposition to the Qantas takeover. UBS’s investment banking arm had been advising Qantas and stood to make an estimated $100 million in fees. Fiani and one of his other colleagues, Shawn Burns, have set up their own funds management business.
In its downgrade, S&P recommended that advisers seek an alternative manager when looking for a “core” Australian-equities exposure. That’s a devastating blow to UBS which has reportedly lost billions of dollars from the fund in the wake of the Fiani departure. So too was the reference in the statement to staff turnover suggesting “deeper’ problems” at UBS “as a whole”. The comments will concern fund trustees and other advisers.
Said S&P, in the past six months, the UBS Australian-equities team has lost five of its most senior team members:
Paul Fiani (head of equities), Shawn Burns (portfolio manager), John Moran (head of research), Marcus Truman (investment analyst), and Mark Buizen (portfolio manager, emerging companies).
This follows a similar scenario in early 2006, when the head of UBS’s listed-property team, John Snowden, and two of his team members, resigned and moved to a competitor.
Staff retention is “one of the most crucial aspects for a fund-management organisation. UBS has demonstrated that it is not capable of retaining key people, and this puts at risk the ongoing ability of the Australian equity fund to deliver upon its objectives,” S&P fund analyst Marcus Hanel said.
“S&P recognises the robustness of the investment process and the commitment to find suitable replacements, as demonstrated through the appointment of Simon Shields as the new head of Australian equities, but this fails to outweigh the negative effects of recent events,” Mr Hanel added.
UBS is troubled elsewhere. The US subprime mortgage mess, and subsequent problems in some financial derivatives linked to the loans, claimed the UBS CEO 10 days ago. Peter Wuffli was sacked as CEO and replaced by his deputy.
The bank’s US investment arm, Dillon Bread, has closed a hedge fund after losing a reported $US425 million speculating in subprime mortgages and associated securities.