UBS Group is setting aside hundreds of millions of dollars of its own money to invest in fintech companies, joining its peers in financing startups that are upending traditional banking.
The Swiss wealth manager is planning a corporate venture capital fund to make investments ranging from $10 million to $20 million in dozens of companies, according to a person familiar with the matter. UBS plans to hold the stakes for at least five years, the person said, asking for anonymity because details haven’t been finalized.
A UBS spokeswoman confirmed the bank is starting such a fund, while declining to comment on specifics.
The venture fund comes just months after UBS named ING Groep’s Ralph Hamers, an outspoken champion of digital banking, to succeed Sergio Ermotti as chief executive in October. While wealth management -- UBS’s biggest business -- is traditionally a high-touch operation, with clients valuing personal contact, the coronavirus pandemic has accelerated a shift toward digital services.
“UBS wants to further engage with and support fintech firms,” said Mike Dargan, UBS’s global head of group technology. “The new venture investment portfolio is a next step to accelerate our innovation and digitization efforts.”
The new fund will invest in three broad categories: client engagement, investing and financing platforms, and improving the underlying operations of the bank. While it is already screening potential investments, the bank is still in the process of hiring a team dedicated to run the fund, the people said.
More digital tools are a key part of a revamp of UBS’s wealth unit unveiled earlier this year. The bank wants to use them to save time on administrative tasks and cut costs, as competition for rich clients and a flight to cheaper, passive investment products erode profitability.
Globally, U.S. banks have been at the forefront of spending on fintech, according to Bloomberg Intelligence. The firms are generally more profitable and can afford to plow large sums into such efforts. UBS’s Zurich rival Credit Suisse Group invests in fintech through its entrepreneur capital arm.
UBS is also looking to use technology to make inroads in the Chinese wealth market. The bank is in the process of acquiring a digital fund distribution license, which would provide a plain-vanilla fund offering to rich Chinese customers. Over time, UBS plans to use such a digital license to move into advisory and on-boarding of new wealth clients, according to Edmund Koh, UBS’s head for the Asia Pacific region.
A previous effort by UBS in this area flopped. A 2017 internal project in the U.K. called SmartWealth was shut down a year later.
New chief executive Rich Steinmeier replaced Dan Arnold on October 1.
The global firm is navigating a crisis of confidence as an SEC and DOJ probe into its Western Asset Management business sparked a historic $37B exodus.
Beyond returns, asset managers have to elevate their relationship with digital applications and a multichannel strategy, says JD Power.
New survey finds varied levels of loyalty to advisors by generation.
Busy day for results, key data give markets concerns.
A great man died recently, but this did not make headlines. In fact, it barely even made the news. Maybe it’s because many have already mourned the departure of his greatest legacy: the 60/40 portfolio.
Discover the award-winning strategies behind Destiny Wealth Partners' client-centric approach.