UBS Macro Strategies Team to Start Hedge Fund as Banks Exit Prop Trading

UBS AG (UBSN)’s only team of traders with a global mandate to make bets on macroeconomic trends is leaving the bank to form a hedge fund, said Gerard Satur, the head of macro strategic trading who will lead the fund.

The Sydney-based firm, MST Capital, is in talks with cornerstone investors, said Satur, who remains a UBS employee until next month. The new macro fund will target annual returns of 10 percent to 15 percent, he said in an interview in Sydney today, declining to name potential investors.

Zurich-based UBS is among global investment banks jettisoning proprietary trading desks as regulators impose limits on risk taking in the wake of the worst financial crisis since the 1930s. MST Capital’s team of UBS bankers includes former Morgan Stanley proprietary trader Jeremy Hooper and Matthew Mulcahy, who previously worked for Pacific Investment Management Co.

“We’re spinning out of the best investment bank in Australia,” Satur, 38, said in an interview in UBS’s Sydney office. “We have a very experienced investment team across all asset classes.”

The fund led by Satur began trading for UBS in July 2011. It generated a return through January of 7 percent, according to the Australian Financial Review’s Street Talk column, which first reported the spinoff today. The S&P/ASX 200 index tumbled 7.5 percent in that period.

MST Capital is entering an Australian hedge fund industry battered by investor withdrawals and lackluster returns since the 2008 global financial crisis.

Macro Outperforms

Satur and his team of traders are due to leave UBS in mid- March and will establish their own offices. He said there is likely to be an on-going relationship with UBS.

Jenny Warat, a spokeswoman for UBS in Sydney, declined to comment on the hedge fund move.

The Eurekahedge Macro Hedge Fund Index (EHFI253) declined 1.4 percent last year, outperforming the broader Eurekahedge Hedge Fund Index (EHFI251)’s 4.1 percent decline, according to the Singapore-based data provider. Macro funds trade stocks, bonds, currencies and commodities based on managers’ analysis of fundamental, economic and political factors.

“We’re offering a global macro product, with an Asia bias, which we think can perform well in all market environments,” said Mark Levinson, a former managing director at Goldman Sachs Australia Pty Ltd., who joined MST Capital as its head of investor relations.

UBS, which is cutting risk-taking at the investment bank to focus on wealth management, told investors in November that it was evaluating options for its equities prop trading unit. The bank has to close its proprietary trading operations in the U.S. because of the so-called Volker rule, while elsewhere it doesn’t fit with UBS’s strategy even though it’s a “very good profitable business for us,” Chief Financial Officer Tom Naratil said in an interview Feb. 7.

To contact the reporter on this story: Jacob Greber in Sydney at jgreber@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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