UBS Hedge Fund Bonus Cap Has Traders Looking Elsewhere

Mar 6 2013 | 10:46am ET

UBS may have an exodus on its hands at its internal hedge fund unit.

Traders at UBS O'Connor have been speaking with recruiters and other hedge funds after the bank slashed cash bonuses by half. UBS moved the 175 hedge fund employees to the pay structure used through the rest of the bank, which in addition to cutting bonuses to 1 million Swiss francs has also seen some deferred pay moved from O'Connor funds to UBS bonds, Bloomberg News reports.

"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, UBS's head of alternative and quantitative investments, said. "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."

Under the new pay structure, employees making more than US$250,000 have at least 60% of their pay deferred, half of it in the form of UBS five-year debt. That debt can be canceled if UBS's Tier 1 capital ratio drops below 7%; at the end of last year, it was at 9.8%.


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