UBS O'Connor, the $6 billion hedge fund unit within the biggest Swiss bank, risks upheaval as senior traders seek to defect after a clampdown on cash bonuses, two people with direct knowledge of the situation said.
Traders are contacting other hedge funds and recruiters after UBS AG moved them to a pay structure used throughout the firm, said the people, who requested anonymity because their plans to leave aren't public. That resulted in immediate cash bonuses falling by 50% to 1 million Swiss francs ($1.06 million), and some deferred pay being tied to five-year UBS bonds rather than reinvested in O'Connor funds, the people said.
“This structure is analogous to working within a bank,” said Ilana Weinstein, CEO of search firm IDW Group. “But … O'Connor (is) a hedge fund, and this structure is not competitive with working at another hedge fund.”
UBS O'Connor invests only client funds and not bank money, the people said.
“We believe our people choose to be here based on a combination of our team culture, access to client capital and UBS distribution,” Bill Ferri, head of the alternative and quantitative investments business at UBS, said in an e-mailed statement. “I am fully committed to continuing to grow the O'Connor business and am confident that we can credibly compete while aligning with the long-term interests of our clients and UBS shareholders.”
O'Connor offers a global multistrategy fund, a fundamental market-neutral fund and several long-short equity funds, according to its website. The unit has a staff of about 175, including about 90 investment staff, according to a person with knowledge of the group. Most staff members are based in Chicago, with others in New York, London, Hong Kong, Singapore and Tokyo, the person said.
