* UBS commodities team part of equities division
* Commodity performance overall weak in 2012
* Bank to remain active in precious metals flow trading
By Jeanine Prezioso
NEW YORK, Jan 18 UBS plans to grow its
commodities index business even as the firm winds down its fixed
income unit, retaining what bank executives see as an important
product for UBS's wealth management clients.
Edmund Carroll, UBS's global head of commodities trading,
will be relocating from London to New York, bank executives told
Reuters during an interview this week. He will report to Roger
Naylor, global head of equity derivatives.
The bank's commodities group, currently based in Stamford,
Connecticut, will also move to New York this month. The
commodities index business will be placed within the equities
"We're still investing in (the commodities) business,"
Carroll told Reuters via satellite from London in the bank's
"The corporate hedging business in commodities didn't tie
into the wealth management business at all but we wanted to keep
the investor business in commodities," he said.
UBS shuttered the majority of its commodities "flow" trading
business, that traded raw materials and financial derivatives on
behalf of clients, but is seeking to erase the perception that
the bank's restructuring has taken it completely out of the
sector. It will remain active in precious metals flow trading.
The bank announced in October that it will cut its fixed
income business and lay off 10,000 employees while doubling down
on its global asset management and wealth management businesses,
in a move applauded by the stock market.
Investment banks' fixed-income divisions generally include
bonds, currencies and commodities, (known as FICC) and while UBS
is winding down that business, it will also remain active in
currencies and interest rates.
UBS has gone through major reshuffling in its commodities
business in the last two years.
Jean Bourlot, who had served as global head of commodities,
left at the end of 2011 after just about 18 months at the helm,
to start a hedge fund.
Carroll and Hector Freitas took over from Bourlot as
co-heads of the commodities business. Freitas is now global head
of precious metals sales.
UBS plans to focus on three areas within the index business
including a swap business, selling structured products to
wealthy clients and selling structured products linked to
Any risk that may be taken in commodity futures that needs
to be hedged will be done through brokerage houses and other
Wall Street firms, Carroll said.
UBS will be offering commodity indices that track the prices
of baskets of agricultural products, fuels, and metals, much as
a stock index tracks the prices of a basket of equities.
Commodities have grown in popularity with investors since
the middle of the last decade when they were promoted as a means
of diversifying portfolios. Commodity indices have been seen as
relatively simple tools for passive investors to gain exposure
to raw materials prices without having to invest in multiple
The correlations between returns in commodity markets and
other financial assets have increased markedly as more money has
poured into the sector and index investments have often
underperformed individual commodities.
Commodity market performance for 2012 overall was shaky as
global markets focused on the European debt and U.S. fiscal
crises. Assets under management in commodity index swaps fell to
$133 billion in December 2012, the lowest Since June, according
to Barclays Capital data.