UBS Merging Funds of Funds

February 5, 2004 (—Swiss bank UBS AG is creating a new division, Alternative Investment Solutions, which will merge the fund-of-funds business of the Stamford-based O'Connor division with AIS, UBS's Hong Kong-based fund-of-hedge-funds unit, reports Dow Jones.

The bank said the merger will create one of the world’s largest funds of hedge funds, and will be headed by Mike Welch, the former head of O’Connor’s fund of funds business.

O’Connor has faced some concerns from investors because the firm runs both single-manager funds and funds of funds, which has led investors to wonder if business might go to single-manager funds regardless of performance.   The O’Connor division will now be condensed to contain only its existing three single-strategy hedge funds.

Although Alternative Investment Solutions’ assets were recorded at $4.9 billion last September, the figure is suspected to be closer to $8 billion, Dow Jones said.

UBS owns the current largest fund of hedge funds in the world, with $13.5 billion under management and is run by Gabelli Asset Management (GAM).   This fund will not be integrated with the new Alternative Investment Solutions because their client bases are different.    Alternative Investment Solutions is suited for institutional investors, such as pension funds and insurers, while GAM’s client base generally includes wealthy individuals, according to Dow Jones.