Reuters has reported that UBS was in talks with State Street about a possible combination of their asset management businesses, but those talks fell through in June, according to two people familiar with the situation.
For State Street, UBS' actively managed products would provide a nice complement to its mainly index-based strategies, which include passively managed exchange-traded funds. For UBS, the merger would have provided a capital infusion.
The discussions are said to have fallen through, however, over price, and a disagreement about who would actually run the combined unit.
What is interesting about this story is that as recently as last month, UBS Group CEO Sergio Ermotti confirmed that the bank's current strategy was being built on the strengths of all its businesses, including the diversified Asset Management unit. Reuters' sources, however, appear to suggest that there may have been a change of heart, and that, although UBS is 'not shopping it (the asset management unit) around everywhere', it may be interested in discussions with appropriate parties.
One fund manager told Here Is The City, however: 'There are compelling reasons why both sides would want a deal like this. But this is a classic case where both firms will want to come out top dog. The difficulty here is that while UBS is a bigger group than State Street, State Street has by far the biggest asset management business. So who ends up running the joint ?
'To me, this says that, far from trying to ditch asset management, UBS is looking for a transformational deal of its own'.
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