Private banking 2008: When the ultra-wealthy bump into the sub-prime
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UBS DISPOSED OVER the summer of a stake of 20.7% in Julius Baer equity worth about $3.3 billion. While that’s not a mistake to rank alongside its risk management failures in the sub-prime and mezzanine CDO markets, still it might have been better off holding on to it. Julius Baer’s stock has been a great investment in the past six months, far better than that of UBS itself and certainly far better than the billions of dollars-worth of toxic structured credits the big Swiss bank accumulated and has since written off. If you had indexed both banks’ stocks to 100 at the start of 2007, by the end of the year UBS had fallen to just over 70 and Julius Baer had risen to 140. Perhaps even more galling, Julius Baer, whose stand-alone wealth management model stands in reproachful contrast to the UBS model of running a large investment bank with volatile results together with a more stable wealth management business, has been rejuvenated since 2005 in large part as a result of an influx of UBS talent and assets.
