John Costas to build new hedge fund unit at UBS

John Costas, one of the world's top bankers, is leaving his job at the helm of UBS's investment banking arm to set up a hedge fund as the Swiss bank revamps its wealth management business. Huw Jenkins, currently head of equities at UBS, will succeed Costas as chief executive of investment banking at UBS, the world's seventh-largest bank said on Thursday.
Costas, who over the past few years has pushed UBS's investment bank to a top-ranked position, becomes the latest investment banker to follow a now well-trodden path into the hedge fund sector.
He will head the new Dillon Read Capital Management unit which will manage a number of funds and make proprietary trading available for investors.
His move comes with a revamp of UBS's wealth management units, which are to be merged into one business as global wealth management and business banking, UBS said. "The whole move is (meant) to accelerate the consistency of our offering and to foster top-line growth," Chief Executive Peter Wuffli told reporters in a teleconference.
Costas led a drive to expand investment banking in the United States and Asia, and will withdraw from UBS's executive board by the end of the year but remain a non-executive chairman of the investment bank, UBS said.
Analysts voiced concern that high-flying Costas is leaving the investment bank after his strategy of hiring top talent during a downturn in 2002/2003 lifted the firm into the so-called bulge bracket of global investment banking groups.
"We think it's negative that John Costas is gone. He was a charismatic leader and responsible for making the investment bank into the global force that it is today," said Vasco Moreno, research director at brokerage Keefe, Bruyette & Woods.
But UBS shares hardly reacted to the news, as analysts said Costas himself had instigated the move, and UBS had succeeded in picking its new investment banking head from its own ranks. The regrouping of the wealth management businesses will bring together the bank's US, Swiss and international wealth management businesses. It will also bring its Swiss corporate and retail banking unit into one group, called global wealth management and business banking.
Wuffli said the move aimed to boost growth and would bring some cost savings, though it was not primarily intended as a cost-cutting drive.