UBS AG failed to properly disclose risks it took with Swatch Group AG’s funds and should be held responsible for the losses that followed, the watchmaker argued in a Swiss court.
Switzerland’s biggest watchmaker is suing UBS to recover about 30 million Swiss francs ($34 million), including interest, in losses on “absolute-return” investments made in 2007 that UBS said were low-risk in any market environment.
Swatch needed advice from UBS because it hadn’t invested in an absolute-return product before, Alexander Schwartz, a lawyer representing the Biel-based company, said at a hearing in Zurich today. UBS never told Swatch to sell its stake in the fund in question and should therefore be held liable, he said.
“Only the defendant had an obligation to know what they contained and to warn the buyer of the danger of rotten meat,” Schwartz said, comparing the investment products to sausage with meat that’s gone bad.
Martin Bernet, a lawyer for UBS, said the watchmaker is “an institutional investor” that “managed about 2 billion francs at the time.”
“The plaintiff suffers from a so-called hindsight bias,” he added, disputing Swatch Group’s claim that the bank’s risk management should have seen the losses coming. “Swatch was constantly monitoring the value of its investments,” he said.
A verdict in favor of Swatch could encourage other investors who lost money in the financial crisis to sue Swiss banks that managed the funds.
A ruling in the case isn’t expected this week, a spokeswoman for the court said.