UBS still writing down private equity

The Swiss bank is continuing to revalue the portfolio in its UBS Capital unit.

UBS, the global financial services group, continues to grapple with its private equity exposure within its UBS Capital  unit as portfolio companies continue to be written down in value. Rumours also continue to circulate as to whether the bank intends to sell some or all of its investments in private equity funds.


In its third quarter financial results the UBS Capital portfolio has been further written down in Q3 by E285m, an increase of E207m on the amount written down in Q3 2001 but less than the previous two quarters when the division scaled back the value of its portfolio by E355m and E315m in quarters two and one of this year respectively.


In a statement to shareholders, UBS said that the level of writedowns reflected the tough economic environment for companies in the portfolio and the difficulty of effecting successful exits. 'UBS Capital will continue to focus on managing its existing portfolio, maximizing returns, and capitalizing on exit opportunities where they exist.'


UBS Capital is currently in the process of reducing undrawn commitments (which have an overall value of E1.85bn) to one of the group's funds. Total investment by the firm stands at E2.46bn, which coupled with estimated unrealised gains of E550m, has prompted the bank to put a total value on the business of E3bn. Parts of the operation have also split off, with firms such as the Paris-based Avesta being founded this year by former UBS Capital personnel. 


Question marks also still remain as to when or if UBS will sell any of its private equity investments. The bank is a limited partner in a significant number of funds, having invested over E2bn in funds managed by firms such as Blackstone, Candover and Cinven. Although there have been recent suggestions that the bank is actively loooking to sell some of these positions, it is understandably reluctant to confirm an active interest in disposing of some of these investments.


With secondary buyers such as Lexington Partners and Coller Capital enjoying sizeable discounts to par on acquired portfolios at present (ranging from 40 to 60 per cent on some deals), no vendor wants to be seen to be in a hurry to sell. “We do not need to sell the portfolio quickly and cheaply. We don't intend for the sale to be value destructive,” said Mark Hengel, a UBS spokesperson.


Overall, UBS posted net profits of E643m, 29 per cent down on Q2, although slightly higher than for the same period in 2001, when it reported profits of E618m.