UBS acquisition of Credit Suisse leaves fate of ETF arm unanswered

The merger would bring one of Europe’s largest asset gatherers to UBS

Shubham Saharan

Credit Suisse 5

UBS’s “emergency rescue” of Credit Suisse is expected to bolster its wealth and asset management footprint while leaving unanswered questions about the future of its rival's ETF business.

On Sunday, UBS announced it would acquire rival Credit Suisse in a deal worth $3.25bn after turmoil in the US banking industry led to the collapse of several banks before spreading to Europe and rattling that continent’s financial sector.

The move will see UBS Asset Management leapfrog Vanguard as the fourth-largest ETF issuer in Europe with €89bn assets under management (AUM), according to data from Refinitiv.

However, at least one analyst wondered if Credit Suisse’s exchange-traded note (ETN) business would survive.

“As far as Credit Suisse is concerned, this is an emergency rescue,” UBS chair Colm Kelleher said in a company statement. “We have structured a transaction which will preserve the value left in the business while limiting our downside exposure.”

The plan would “augment UBS’s strategy of growing its capital-light businesses,” Kelleher said. Part of the purchase would include a substantial global ETF division which, alongside Credit Suisse’s other asset management divisions, would bring UBS’s AUM to more than $1.5trn.

Credit Suisse is the 15th biggest ETF issuer in Europe and ranked sixth in flow per ETF, according to Eric Balchunas, senior ETF analyst at Bloomberg Intelligence.

Still, its ETF division has struggled to gain traction in the US, where its four ETFs have a combined $647m AUM, according to data from Meanwhile, UBS ETFs have total assets under management of $1.2bn across its 29 US-listed funds.

Moreover, the funds, which disproportionately rely on ETNs, have a rocky history, occasionally whipsawing with little explanation. ETNs are debt issued by a bank, as opposed to ETFs, which are pooled investment vehicles.

The performance has left some analysts questioning the future of Credit Suisse’s ETN business.

“We expect the bank’s ETN business to close after a history of product liquidations and delistings,” Balchunas and Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence, said in a note Friday.

“The Credit Suisse crisis is a stark reminder that exchange-traded notes carry credit risk,” they added, going on to state that Credit Suisse’s European lineup “is not subject to such credit risk.”

The funds include the Credit Suisse X-Links Crude Oil Shares Covered Call ETN (USOI), the Credit Suisse S&P MLP Index ETN (MLPO), the Credit Suisse X-Links Silver Shares Covered Call ETN (SLVO) and the Credit Suisse X-Links Gold Shares Covered Call ETN (GLDI). In the last week, the ETFs have shed $40.7 million, data shows.

UBS declined to comment to

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