The UBS empire’s decisive week | USAEMALL.com

One scoop to start: BlueCrest Capital Management, the hedge fund turned family office founded by billionaire Michael Platt, has gained more than 28 per cent this year after betting on a weakening US dollar.

And a second scoop: Lex Greensill, the Australian financier, is set to make his first public courtroom appearance since his eponymous lending company collapsed when he testifies in a high-stakes London court case brought by a Credit Suisse fund against SoftBank.

In today’s newsletter: 

UBS’s Swiss quarrel

UBS chair Colm Kelleher is a frustrated man these days.

The Irishman is among the UBS executives steeling themselves for an unwelcome announcement later this week.

Despite their considerable lobbying efforts, they’re expecting Swiss regulators will force them to hold what they see as an unfairly vast amount of capital in reserve.

At the bank’s annual general meeting last month in Lucerne, an exasperated Kelleher called the plans “extreme” and railed against Switzerland’s “over-regulation”.

UBS’s leaders say the bank is being punished for its government-orchestrated rescue of Credit Suisse, which collapsed in 2023 after a spate of scandals over the previous decade.

The takeover staved off a European banking crisis and handed UBS what appeared to be a huge windfall.

But it created a banking behemoth that was “too big to fail”, in the eyes of Swiss regulators: UBS now has a balance sheet larger than the country’s entire economy.

It gets to the heart of the stand-off that’s reverberating through the world of Swiss banking.

UBS’s bosses including Kelleher and chief executive Sergio Ermotti believe the bank’s scale now gives it the chance to compete with global heavyweights such as Morgan Stanley.

But Switzerland’s government and regulators want to impose more stringent capital rules on the country’s banks.

They want lenders with foreign subsidiaries to hold additional capital to deal with future crises, a proposal that would affect the sprawling UBS drastically.

UBS currently has to match 60 per cent of the capital at its international subsidiaries with capital at the parent bank.

But the lender’s executives think the government will force it to fully capitalise its overseas units.

UBS says that would increase its total capital requirements by 50 per cent from current levels. It estimates this would push its core equity tier 1 ratio — a key measure of capital strength — to between 17 per cent and 19 per cent.

That’s a lot more than any of UBS’s international rivals: The closest is Morgan Stanley with a CET1 ratio of 13.5 per cent.

It all comes to a head on Friday, when the proposals will be revealed in full, allowing the bank’s leaders to plot their next move.

In the balance is UBS’s dream of competing with the US banking giants on equal footing. No pressure.

Temasek backs away from start-ups

It’s not been a pristine run for Temasek in its bets on risky but potentially lucrative start-ups.

So it was clear to see the rationale this week when the FT revealed that the $300bn Singaporean state-owned fund has been reducing its investments in early-stage companies. It’s been scaling back its direct investments in start-ups because — it says — of interest rate rises.

But Temasek also wrote down hundreds of millions of dollars after embarrassing blow-ups. Prime among them: FTX, the crypto exchange built by Sam Bankman-Fried that collapsed in 2022.

Temasek was one of FTX’s biggest investors and was ultimately forced into a humiliating $275mn write-off. The fund’s senior management team took a pay cut as part of an effort to take “collective accountability” for the poor investment.

Then there was eFishery, the Indonesian start-up that’s been blighted by allegations of inflated sales and profit figures. One of the company’s founders told Bloomberg in April that he put fake numbers into the group’s financial report.

Other failed start-ups Temasek has backed in recent years include Zilingo, a Singaporean ecommerce venture, gene therapy company Locanabio, Boston-based Pear Therapeutics and biotech Tessa Therapeutics.

As one fund manager briefed on the group’s strategy sagely put it: “Temasek’s investment portfolio has taken some pretty big hits in recent years.”

So what next?

Temasek says higher-for-longer global interest rates have made it harder for start-ups to raise capital.

It will shift its direct investments away from start-ups and make bigger commitments to a smaller pool of companies that are closer to going public, according to the FT’s Owen Walker and DD’s Arjun Neil Alim.

The group will continue to put money into early-stage companies, but indirectly via venture capital funds. It’s hoping to diversify and reduce the volatility of its investments.

Temasek returned just 2 per cent in its financial year ending March 2024, compared with 28 per cent for the S&P 500 in the same period. It’ll hope the changes reap better returns.

Job moves

• Evercore has hired Mike Addeo as a senior managing director in its private capital advisory group in New York. He was most recently a managing director and head of restructuring at Blackstone Credit & Insurance.

• The Lloyds Banking Group executive leading the charge to grow its “mass affluent” customers is leaving the bank after more than a decade. Jo Harris will leave her job at the end of June, the FT scooped.

• Partners Group has appointed Anastasia Amoroso as managing director and chief investment strategist for private wealth and retirement. She joins from iCapital, where she was chief investment strategist.

• Simpson Thacher has named Joanne Mak as a partner in its secondaries practice in London. She joins from Kirkland & Ellis, where she was a partner.

• O’Melveny has hired Howard Goldwasser and Skanthan Vivekananda as partners in its corporate finance group. They both join from Orrick.

Smart reads

PE’s divergence If you enjoyed yesterday’s read on how KKR, Blackstone and Apollo are drifting apart, tune in to this week’s Behind the Money episode to hear DD’s Antoine Gara discuss the trend.

Donald’s donors Some of the US president’s biggest inauguration donors are benefiting from favourable government decisions, the Wall Street Journal reports.

Gulf shift As Saudi Arabia struggles with lower oil prices and poorer finances, bankers and executives are courting the country’s neighbours, Bloomberg reports.

News round-up

Shareholders lash out at $33bn take-private of Toyota subsidiary (FT)

Thames Water faces weeks of uncertainty as watchdog reviews £4bn creditor plan (FT)

Jeffrey Epstein invested with Peter Thiel, and his estate is reaping millions (NYT)

Chart and Flowserve agree $19bn merger to form gas and liquid technologies leader (FT)

Glencore-backed Cobalt Holdings scraps planned London listing (FT)

L’Oréal poised to seal €1bn deal for skincare brand Medik8 (FT)

British steelmakers race to secure US orders at lower tariff rate after UK carve-out (FT)

Yale nears deal to sell $2.5bn of private equity stakes (Bloomberg)

Santander scraps plan to appoint executive under criminal investigation (FT)

Apple and Alibaba’s AI rollout in China delayed by Donald Trump’s trade war (FT)