ZURICH Swiss private bank Union Bancaire Privee (UBP) is in talks with Nexar to merge the French alternative asset manager with UBP's fund of hedge funds unit, sources said on Friday.
Once one of the world's biggest funds of hedge funds, the UBP unit has been beset by client withdrawals after a large exposure to fraudster Bernard Madoff tarnished the bank's reputation for stringent risk management.
Four hedge fund industry sources said the groups were in talks, with two identifying UBP as the potential buyer.
Nexar and UBP both declined to confirm any negotiations.
"UBP does not have any comments to make regarding its interest in Nexar. However, the financial industry is today in a consolidation phase and therefore, there are many opportunities to consider," UBP spokesman Jerome Koechlin said in an email.
The negotiations come close on the heels of UBP's acquisition of ABN Amro Bank (Switzerland), the Swiss private banking arm of nationalised Dutch bank ABN Amro, for an undisclosed sum.
The ABN Amro deal added 11 billion euros (9 billion pounds) to UBP's client asset base and 350 staff to its headcount. However, last week sources told Reuters the bank would cut 300 jobs in an effort to reduce costs as client revenues fall.
UBP fund of hedge fund assets slumped from as much as 58 billion Swiss francs (39 billion pounds) in June 2008 to 17 billion francs two years later, the last time it disclosed assets in the unit. Total assets at UBP plunged to 60.7 billion francs at the end of June from a peak of 135 billion at the end of 2007.
Conversely, Nexar, founded in 2009 by former members of Societe Generale's alternative asset management team, has already bought two rivals in its short history.
It bought Britain-based asset manager Ermitage from Caledonia Investments (CLDN.L) this year after buying a fund of hedge funds unit from German insurer Allianz (ALVG.DE) in 2010, pushing assets up to $3.7 billion (2.3 billion pound).
(Editing by Will Waterman)