UBS’ Credit Suisse Buyout Leaves Fate of ETF Arm Unanswered

UBS Group’s “emergency rescue” of Credit Suisse Group is expected to bolster its wealth and asset management footprint, while at the same time leaving unanswered the question of whether their exchange-traded fund unit will come along.  

UBS on Sunday said it would acquire rival Swiss bank Credit Suisse for around $3.2 billion after tumult in the U.S. banking industry led to the collapse of several banks before spreading to Europe and rattling that continent’s financial sector. At least one analyst wondered if Credit Suisse’s exchange-traded note would survive. 

“As far as Credit Suisse is concerned, this is an emergency rescue,” UBS Chair Colm Kelleher said in a company statement. “We have structured a transaction which will preserve the value left in the business while limiting our downside exposure.” 

The plan would “augment UBS’s strategy of growing its capital-light businesses,” Kelleher said. Part of the purchase would include a substantial global ETF division which, alongside Credit Suisse’s other asset management divisions, would bring UBS’ assets under management to more than $1.5 trillion, according to the company release.  

Credit Suisse is the 15th biggest ETF issuer in Europe and ranked sixth in flow per ETF, according to Bloomberg analyst Eric Balchunas in a tweet Monday. Credit Suisse's ETF unit in Europe sits separate from its U.S.-listed ETNs.

Still, its exchange-traded product division has struggled to gain traction in domestic markets, where their four U.S.-listed exchange-traded notes have a combined $647 million in assets, according to etf.com data. Meanwhile, UBS ETFs have total assets under management of $1.18 billion across their 29 U.S.-listed funds.  

Moreover, the funds, which disproportionately rely on exchange-traded notes, have a rocky history, occasionally whipsawing with little explanation. Exchange-traded notes are debt issued by a bank, as opposed to exchange-traded funds, which are pooled investment vehicles.   

The performance has left some analysts questioning the future of Credit Suisse’s ETN business.  

“We expect the bank’s ETN business to close after a history of product liquidations and delistings,”  Bloomberg ETF analysts Eric Balchunas and Athanasios Psarofagis said in a note Friday. “The Credit Suisse crisis is a stark reminder that exchange-traded notes carry credit risk,” they added, going on to state that Credit Suisse’s European lineup “isn’t subject to such credit risk.”  

The funds include the Credit Suisse X-Links Crude Oil Shares Covered Call ETN (USOI), the Credit Suisse S&P MLP Index ETN (MLPO), the Credit Suisse X-Links Silver Shares Covered Call ETN (SLVO) and the Credit Suisse X-Links Gold Shares Covered Call ETN (GLDI). In the last week, the ETFs have shed $40.7 million, etf.com data shows.  

UBS declined to comment.  

(Editor’s note: The fifth paragraph is updated to show Credit Suisse’s U.S. ETN unit and European ETF division are separate. The sixth paragrph clarifies the exchange-traded product terminology and that the four U.S. products are ETNs.)

Contact Shubham Saharan at [email protected]