UBS has decided to separate its investment bank from its asset management arm. This step could presage UBS’ jettisoning of its investment bank. As I said in a previous post, Merrill Lynch should do the same thing. Apparently 247WallStreet agrees with me and throws in Citibank and Wachovia to boot.
Asset management is in inherent conflict with investment banking in that an asset management client can never be sure that he isn’t being put into an investment because its the right investment for his portfolo or because it makes money for the investment bank. The whole auction rate security debacle is case in point. So is the collapse and bailout of the internal Bear Stearns, Citigroup and UBS hedge funds, and the near death of Goldman’s Global Alpha hedge fund.
An investor is better off trusting a pure-play asset manager (like say a Northern Trust) than an investment bank or universal bank.