Swiss banking giant UBS is closing its Dillon Read Capital Management hedge fund unit less than six months after opening its doors because the business plan proved prohibitively expensive and complicated, top bank executives said Thursday.
It was an embarrassing about-face for the company, which 18 months ago took steps to create a separate alternative-investment and proprietary-trading unit and in November launched its first fund with $1.2 billion from outside investors.
The multi-strategy fund was to trade alongside the bank's proprietary trading operation, which has assets of about $3.5 billion.
The attempt to manage internal and external money at the same time, which is unusual on Wall Street, proved costly and unwieldy, UBS executives said.
The decision to shut down the unit and return the hedge fund's money to investors was disclosed as UBS announced that U.S. sub-prime mortgage losses in the first quarter hurt Dillon Read and lowered overall results for UBS.
But UBS executives said the sub-prime losses were not a reason for closing the hedge fund.