UBS forms $90bn alternatives business – Exclusive

The Swiss bank has laid out ambitious AUM targets for infrastructure and private equity after combining the asset classes with its bigger real estate business to form the Real Estate and Private Markets platform.

UBS, the Swiss bank, has become the latest large financial services group to throw its hat into the ring in offering institutional clients a centralized and conjoined alternative assets business, PERE can reveal.

In response to investor demand, the firm has combined its direct real estate and infrastructure platforms, its indirect multi-manager real estate, infrastructure and private equity businesses, and its infrastructure debt offering to form Real Estate & Private Markets (REPM). The total assets under management for the amalgamated platform is approximately $90 billion, with the lion’s share coming from its long-established real estate business.

Thomas Wels, who joined the bank in 2005 before being made head of real estate in 2012, will lead REPM.

His management committee comprises: Tommaso Albanese, promoted to head of infrastructure;
Richard Johnson, head of business development; Matt Lynch, head of US real estate; Graham Mackie, head of Asia real estate; Tilman Hickl, head of global client mandates; Reto Ketterer, head of Europe real estate and chief operating officer; Patrick O’Sullivan, head of infrastructure special projects; Eric Byrne, promoted to lead multi-manager strategies; Dani Brullmann, head of real estate for Switzerland; and William Hughes, head of strategy and research. 

They will oversee more than 500 staff across 27 countries.

“Now we have a function that represents all our products to our clients,” Wels told PERE in an exclusive interview. He said while UBS had close client relationships with large institutional investors, smaller investors required a “simplified” solution and “broader asset allocation advice in the illiquid space.”

“This is very much client driven,” he said.

Wels added that the introduction of REPM should lead to meaningful growth in terms of AUM. When asked for specific forward-looking targets, he predicted the bank’s private equity multi-manager business could grow from around $2 billion currently to as much as $10 billion in five years.

“There is a greater willingness from investors to use funds of funds for private equity than there is for real estate, so there’s real potential there to be bigger. Real estate is a $10 billion business, so there’s no reason why private equity couldn’t be a $10 billion business as well. That’s got to be the target.

“Infrastructure funds of funds are different. They are not as established, but I think being a $5 billion player should be possible.”

Meanwhile, Wels said the firm’s direct infrastructure could more than double from the $4 billion it has currently to another business of at least $10 billion AUM. “That’s possible and is supported by our current client base.”

Wels also pointed towards the launch of “crossover” products by the multi-manager part of REPM. “We’ve seen RFPs for such solutions in the illiquid space that cover real estate, private equity and infrastructure.”

He said UBS first started constructing such hybrid investment vehicles 10 years ago, but the global financial crisis saw potential investors curb their enthusiasm for such innovations. However, as investors sought to be better engaged with each of the asset classes, appetite for combined strategy products has returned, he added. “We’ll be introducing products combining asset classes in the next quarters.”

UBS is the latest large financial organisation to introduce a combined alternative assets division. In the last two years, and with a common focus on real assets, firms including asset managers BlackRock and TIAA, and investment banks JPMorgan, Deutsche Asset Management and Morgan Stanley have formed combined platforms, adding to earlier set-ups by Macquarie Bank and French insurer AXA.

The decision not to use real assets in the name for UBS’s platform was because of its inclusion of private equity, Wels said. “We had endless discussions about that. But private equity is not real assets and so that’s why our brand is broader.”