By Niki Natarajan
With Ivy Asset Management's funds now in liquidation, one wonders if Union Bancaire Privée, which has seen its assets fall by 72% in just two years, is dying by Imperial China's torture and execution method of slow slicing.
Like Ivy, UBP had both Amaranth Advisors and Madoff in its portfolios. Is it still standing simply because, at $56.9 billion in June 2008, it had nearly three and a half times more money than Ivy's peak of $16.9 billion at the end of 2006?
With some $1 billion invested with Madoff and family connections to him, it would seem that few can believe that the Swiss private bank is still in 11th place in terms of FOHF assets, now at $16.1 billion, according to the latest InvestHedge Billion Dollar FOHF Club survey (see page 28).
From the moment the Madoff fraud was exposed, UBP appears to have followed a two-pronged strategy wrapped up in a mammoth PR pashmina. Stage one: The Payoff - offering 50% of the losses and a reimbursement of some of the fees, if the investor, like Louisiana State Police Retirement System, agreed to stay invested for five years. Stage two: The Face Lift - a seemingly complete-reinvention of its asset management business, from a hedge fund-driven empire to a long-only business that offers hedge fund capabilities.
Press release after press release announcing the conspicuously expensive arrivals of Richard Wohanka, former chief executive officer of Fortis Investment Management, as the new chief executive officer, and Daniel Kelly from Harvard Management Company to become the first ever chief risk officer, has kept the positive news in the headlines, no doubt in the hope that future investors may forget the past.
More recently, Wohanka's former Fortis colleague Emmy Labovitch has joined as the head of marketing, but appears to face an uphill battle. Death by 1,000 cuts is also another term for creeping normalcy, defined by Wikipedia, as the way a major change can be accepted as normality if it happens slowly, when it would be regarded as objectionable if it took place in a single step or short period.
Wohanka will surely remember from his long-only days that consultants like firms to have three years of track record after new investment changes have been implemented. But unlike with Ivy, owned by a big public institution - Bank of New York Mellon - the post-Madoff hiring spree at UBP could be afforded from the very deep pockets of de Picciotto's private bank.
But has that money really been invested wisely? UBP, especially in Geneva, was arguably never a place where people stayed long. More surprisingly perhaps, one of the longer term residents, Jan-Erik Frogg, has also now left to join EIM. London is set to see the departure of Phelim Bolger, who is said to be heading to HSBC Alternatives.
A deeper cause for concern is not the revolving doors of the older guard, but the fact that one of the newest recruits has also already left. Sara Sprung, who replaced Roman Igolnikov as chief investment officer, stayed only one year. Another recent press release has gleefully announced the hire of Larry Morgenthal to replace her - who is also replacing Matthew Stadtmauer, former CEO in the US, another senior executive who left in the summer.
The ensuing media interest in the Madoff mayhem currently circling the courts may see UBP face further cuts, one slice at a time. Some believe that an investment mistake like Amaranth can be forgiven, but that a back office mistake like Madoff is unforgivable.
All of this raises wider questions such as: Should funds of funds that invested in Madoff continue to be in business? What is your opinion? Go to the brand new InvestHedge website www.investhedge.com and give your opinion in our anonymous poll now.