Increased market share into the lucrative US hedge fund market was the driving force behind UBS’ planned purchase of Amro’s prime brokerage arm. Using a strong cash base to make acquisitions rather than return capital to shareholders, for UBS, the addition will boost its presence in the smaller end of the US hedge fund market, vaulting the firm into a top spot in the world’s biggest hedge fund market, UBS claimed in a news release. How that top spot is defined is not clear, and certainly the traditional powerhouses in the prime brokerage space – Morgan Stanley, Goldman Sachs, and Bear Stearns, among others – will dispute UBS’ claim.
“This transaction presents an opportunity to accelerate our Hedge Fund Services business strategy by building relationships with clients at an early stage of their growth. Through this acquisition, UBS will become the primary broker for a new group of hedge fund clients. Expanding into this new client segment is one of our key strategic priorities for growth,” said John Costas, chairman and CEO of UBS Investment Bank in a statement.
UBS has tended to focus on the large end of the hedge fund business while ABN AMRO, as noted, specializes in smaller funds. Global Custodian , PLANSPONSOR’s sister publication, surveys the prime brokers every March; that information is available on www.globalcustodian.com – or in the spring issue of Global Custodian.
Amro’s prime brokerage division, headquartered in New York currently has approximately 190 employees and 300 clients – it has metamorphasized before, when Furman Selz was bought by ING, which in turn sold it to ABN AMRO.