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UBS Willow Management Sued by Investor Over CDS Strategy

UBS Willow Management LLC was sued by an investor in its Willow Fund who claims it deviated from an announced strategy of investing in debt securities by trading in credit default swaps.

Ken Boudreau asked for class-action status for the suit, filed today in federal court in Manhattan on behalf of other Willow Fund investors. He also sued owners of the joint venture -- Bond Street Capital LLC and UBS Alternative and Quantitative Investments LLC -- as well as the fund’s managing member, UBS Fund Advisor LLC.

“The Willow Fund abandoned its focus on investing ‘primarily in debt securities’ of companies experiencing business or financial difficulties” starting in 2008 and “purchased and traded CDS that were based on largely foreign sovereign debt,” according to the complaint.

A credit-default swap is a contract that requires one party to pay another for the face value of a bond if the issuer defaults.

Boudreau said he is seeking to recover more than $200 million on behalf of himself and other investors.

Megan Stinson, a spokeswoman for Zurich-based UBS AG, didn’t immediately return an e-mail request for comment on the lawsuit. A person who declined to provide her name at Englewood Cliffs, New Jersey-based Bond Street Capital declined to comment on the lawsuit.

The case is Boudreau v. UBS Willow Management, 12-cv-9288, U.S. District Court, Southern District of New York (Manhattan).

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