Until recently, it appeared that UBS’s global prime brokerage business was staging a comeback after having been badly hurt in 2008 during the market collapse. But a recent exodus of senior-level staff, including the firm’s prime services co-chief Stu Hendel, has bank insiders and hedge fund clients wondering if the business will be able to rally once again.
Last year UBS increased its prime brokerage business by 30%, signing up such brand-name spinouts as Goldman Sachs alum Pierre-Henri Flamand’s Edoma Capital and ex-Farallon Capital Management executives’ Route One Investment. But the impressive run of new business was not enough to retain senior prime brokerage professionals. Several issues, including failure to pay competitive rates and bonuses to retain and recruit staff, led to the departures.
The firm did not pay bonuses in 2008, and 2009 payouts were considered well below the compensation at rival firms, said UBS insiders. Many employees were expecting this year’s bonuses to be on par with last year’s results and were disappointed.
“We went through a very tough appraisal process and that was reflected in the compensation rewards,” said a UBS official, who asked to remain anonymous, regarding the recent reviews and bonuses. “Unless this is effectively communicated, it inevitably has consequences for how people perceive that process.”
While some departures may have been related to compensation, others who left were disillusioned with the firm’s lack of culture and senior leadership in the United States, said individuals familiar with the situation. “They have a relatively weak U.S. franchise,” said one former staffer, adding that the firm lacks a unified culture, which is a selling point in attracting talent. “And if you don’t have a U.S. franchise, it is difficult to have a prime brokerage business.”
Recent cost-cutting measures, such as consolidating support groups in client services and operations, have also caused friction, as the changes will reduce staff. But one UBS insider said that the consolidation of the client services group is meant to reduce duplication within various departments.
Since the start of the year, the bank has lost six senior prime brokerage executives. Chris Erickson, the former global head of technology and client services, resigned in February for personal reasons. Hendel, the co-head of global prime services who joined the bank in 2009 from Morgan Stanley, resigned in March and was closely followed by Jon Yalmokas, the head of U.S. prime brokerage sales, and Charlotte Burkeman, the co-head of European prime services. Hendel, Yalmokas and Burkeman will join Bank of America Merrill Lynch in June, where Hendel will serve as the head of that firm’s global prime brokerage business. Yalmokas joins as head of U.S prime brokerage sales and Burkeman as co-head of prime brokerage for Europe, the Middle East and Africa. Other notable UBS departures include Dan McGrath, a managing director in client services, and Megan Kelleher, a managing director in prime brokerage sales.
UBS is expected to announce the names of new senior management within prime services this month. Until then, Mitch Moore, the co-head of global prime services at UBS, remains at the helm.
