UBS WILLOW FUND
A CLASSIC CASE OF RISKY DERIVATIVE BETS GONE BAD
In October 2012 investors were informed that the Willow Fund would be liquidated, after having sustained substantial losses. In a recent New York Times article on the UBS Willow Fund, it was reported that the fund had suffered losses of approximately 80% in the first three quarters of 2012 after its manager made a radical change in investment strategy and “piled into some colossally bad derivative trades.” “The investors, some of whom hadn’t realized they were holding a portfolio filled with risky bets against the debt of European nations, were stunned,” says the article.
The Willow Fund’s exposure to credit default swaps began to significantly increase, and by the end of 2008 while corporate bonds amounted to only 6% of the portfolio, the value of credit default swaps rocketed to 25% of the portfolio, from only 2.6% in 2007. By 2009, credit default swaps amounted to 43% of the Willow Fund’s portfolio composition, the article claims. In 2012, the Willow Fund posted an 89% decline and, as the fund was being wound down, UBS reported that approximately 70% of its losses derived from exposure to credit default swaps – a stunning fact.
It has been reported that UBS Willow Fund investors are expected to receive pennies on the dollar after liquidation of the fund.
Various press reports have stated that the Willow Fund’s radical change in investment strategy through its increasing exposure to credit default swaps, and commensurate decrease in exposure to corporate bonds, transformed the fund into a highly speculative and aggressive gamble on, in essence, the debt of European nations. Did Willow Fund investors really understand what they were invested in and the magnitude of risk to which they were exposed and, if they did, would they have agreed to invest or remain invested?
Investors seeking to file arbitrations will allege that securities brokerage firms, like UBS, have a legal obligation to ensure that when offering and selling an investment, like the Willow Fund, it makes full, complete and accurate disclosures of all material facts to its customer, and ensures that the recommendation to purchase is suitable. The failure to do so is a violation of securities laws and securities industry rules and may give rise to liability for losses sustained.
Securities arbitration attorneys are presently reviewing cases for investors against UBS for their purchases of the Willow Fund. UBS customers who purchased the Willow Fund can contact our office to explore whether they can recover their Willow Fund losses. All calls handled on a confidential, no obligation basis. Cases taken on a contingency fee basis, meaning no attorney’s fee owed to the law firms if no recovery. Call 212-509-6544 for additional information regarding Willow Fund arbitrations, or email us at info@beamlaw.com
