Investment banks and their in-house hedge funds were once thought capable of building a compatible, mutually beneficial relationship. It is now clear that they are unhappy bedfellows.
UBS had its reputation marred after its in-house hedge fund unit, Dillon Read Capital Management, was forced to wind down last year just 11 months after starting to trade, having incurred losses of $124 million.
Lehman Brothers has been forced to move $1 billion of assets from three troubled internal hedge funds onto its balance sheet.
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