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UBS Group (UBS) Cuts Asset Management Jobs, Focuses on China

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Given that UBS Group AG (UBS - Free Report) is focusing more on growth in China, along with sustainable and passive investment strategies, it has started slashing jobs at its asset management unit, according to Bloomberg.

While these job cuts have not yet been officially announced by the company, according to people familiar with the matter, nearly 100 job positions have already been eliminated over the past few months in the smallest operating divisions of the company, including distribution.

Two people familiar with the matter informed that out of the above-mentioned cuts, nearly 30 were in the United States, with many in New York.

Notably, as per UBS Group’s filings, the company’s asset management unit had nearly 2,361 employees at the end of March.

A UBS Group spokeswoman stated, “We don't comment on adjustments that we make over time and are focused on serving the needs of our clients, growing our business and improving efficiency.”

Notably, in order to revamp and fix the company’s asset management division, Ulrich Koerner, the unit’s chief, has been disposing off assets, reviewing offerings and pushing into passive investment strategy products since 2014.

As more investors are looking for ways to reduce their investment costs, focus is shifting from active investment strategies to passive investment products. In fact, now, passive products account for nearly 40% of the total assets managed by UBS Group’s asset management unit.

Although this increased focus on passive investment products has helped in reversing the unit’s asset outflows, it negatively impacted the company’s margins.

Along with an increased focus on passive products, Koerner’s focus has also been to grow in Asia. Last year, the company availed a private funds license in China, which permitted its investment management unit to manage money for mainland institutional and high-net-worth investors in the region.

Additionally, Koerner has introduced nearly 90 measures to revive the asset management business. He launched a platform, through which other banks could outsource asset-management services. He also hired a team of professionals from RobecoSAM to boost sustainable-investing products.

Though the company remains focused on building capital levels, global expansion and executing restructuring initiatives, its net interest income continues to remain under pressure due to persistent negative interest rates in the domestic economy. Also, the strict regulatory framework is likely to keep costs elevated and impact profitability.

Shares of UBS Group have lost 3.1% in the past year compared with 1.1% growth recorded by the industry.

Currently, UBS Group carries a Zacks Rank #4 (Sell).

A few better-ranked stocks from the same space are Banco de Chile (BCH - Free Report) , Banco Santander-Chile (BSAC - Free Report) and Bank of Montreal (BMO - Free Report) . Each one of these currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Banco de Chile have gained 25.2% over the past 12 months. Its Zacks Consensus Estimate for the current-year earnings has moved up 1% over the last 60 days.

Banco Santander-Chile’s shares have gained 30.2% in the past year. Its Zacks Consensus Estimate for the current year has remained stable over the last 60 days.

Bank of Montreal’s shares have gained 12.6% over the past 12 months. Its Zacks Consensus Estimate for current fiscal’s earnings has climbed 1.9% upward over the last 60 days.

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