A close cooperation between the wealth management and fund businesses is a must at most banks. At UBS however it may have contributed to a substantial outflow of assets at the ETF unit.
More than $3 billion – that’s how much money clients of UBS have taken out of exchange traded funds (ETFs) in November alone. The ETF business on aggregate had an outflow of $585 million in the full year, according to a report by the «Financial Times» (behind paywall), which cited ETFGI, an analyst.
In 2017, Switzerland’s largest bank attracted $11.4 billion with the ETF business.
Not Alone to Suffer
The Swiss bank by no means is alone in losing assets – no surprise given the volatility on the markets that prompted investors to retrieve money. They mostly pulled assets out of index funds that are highly liquid. New money has halved compared with the boom year of 2017.
Even Blackrock, the largest ETF provider, has seen new money growth cut in half this year.
Compensated by Other Segments
A major concern for UBS must be that the outflows were prompted from within the company. The bank’s wealth management business reportedly sold large volumes of own ETFs, the newspaper said.
UBS told the «FT» that one of its large clients had changed the allocation of its funds in November. The outflows had been compensated for by inflows in other segments within asset management.
Squeeze on Margins
If the large client mentioned is the own wealth management unit, UBS is evidently witnessing the other side of the medal of the fund business’ recent trend. Banks have been eager to sell more of their own shares because of stronger documentation rules, the elimination of retrocessions and a more general squeeze on margins.
At UBS, of a total 776 billion Swiss francs ($782 billion) invested at the asset management division, some 210 billion came from the wealth management unit.
