Oil fund giant UBS has said it would not fund any of its assets that are being sold off amid rising market volatility.
The decision comes after the company reported a loss for the fourth consecutive quarter, and has been criticised by the Federal Reserve and other markets for selling its holdings at too low a price.
The US benchmark oil index closed up 0.2 per cent to $60.50 a barrel.
UBS said it did not see a need to sell any of the $1.9 billion in assets, which includes the world’s largest oil company, Total, and its affiliates.
“We are focused on improving the long-term sustainability of the investment portfolio and its ability to serve as a catalyst for economic growth,” the bank said in a statement.
The fund, which was founded in the 1950s, said it was committed to investing in the future, and said it remained committed to “high quality, globally diversified assets”.
UBS had invested $2.4 billion in oil, gas, mining, timber and minerals since the fund’s founding in 1998.
It has $1 billion invested in coal, $500 million in gold, $5 million in copper, and $500m in copper.
“The value of the oil fund remains high, with its long-standing strength as a provider of investment returns and as a reliable investment source is strong and resilient, and we remain committed to our long-running approach of investment in the world-class companies and businesses that support economic growth and wellbeing,” it said.
Key points: UBS is cutting $1bn in assets as a result of falling prices The fund said it had not sold its holdings due to a lack of liquidity It is expected to sell $5bn more assets to improve the fund in the next 12 monthsUBS said its current asset allocation was “moderate” with $1,200bn under management, but it has already reduced $1b to $900bn.
It is looking to raise $2bn more in the second half of next year.
UTSB is cutting 1,000 jobs in an effort to reduce its liabilities, but is not expected to cut its current assets.
“As the oil price declines, we expect the value of our portfolio to decline further,” UBS chief executive Jens Weidmann said in the statement.
“In a global environment that is becoming more volatile, the global market environment is becoming increasingly difficult to predict.”
UBS’s assets under management had been estimated at $1 trillion, but that figure has now risen to $2 trillion, Mr Weidman said.
The bank said it expects to sell a total of $1-billion in assets next year, including $300 million in cash.
It said it also planned to reduce the number of shares it holds from 15 per cent of its total assets to 10 per cent.
Ubs is expected in a second-quarter report on Tuesday to disclose a third-quarter loss, but also said it expected to “improve its performance over the course of the next year”.
‘UBS has been doing its homework’ “UBS is a large fund with a diverse portfolio, with significant exposure to the global oil and gas and commodity markets.
We have seen that our ability to adapt to the market is one of our strengths,” Mr Weimmann said.
“Our current asset mix remains moderate, with the exception of our coal portfolio, which is under strong management.”
UBS also said its investment in energy-intensive companies such as the energy-efficient home appliances and food processors group was growing, with total assets under manageability of $2 billion, and planned to increase its holdings to $3.5 billion by the end of 2018.
UBS will invest $1-$2 billion in new assets every year for the next two to three years, based on market conditions, it said, adding that it expected a return on assets to “average at least 4%”.
The bank is also expected to increase the number it holds in its benchmark index of industrial stocks by up to 15 per a year, and will increase the proportion of its portfolio under manageable by a further 50 per cent over the next four years.
In a statement, UBS chairman Jim O’Neill said the fund was “fully focused on strengthening its global portfolio in order to achieve strong results for our shareholders”.
“We are focusing on improving our long term sustainability of our investment portfolio by diversifying our investment into higher quality, internationally diversified companies and our core business of investing in high-quality, globally focused businesses,” he said.