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Hawking private assets may be a new trend in wealth management, but some of the problems it creates are evergreen.
Swiss bank UBS has been striking fee-sharing deals of the kind that inspire questions about conflicts of interest. Asset managers including Carlyle and CVC agreed to give UBS a slice of their performance fees when the bank funnels wealthy clients towards private funds, dubbed “evergreen” because they have no fixed end date. The fancy name for this is a “retrocession”.
Whatever the name, this kind of arrangement creates a conflict of interest. An adviser, given the choice between a fund that boosts their own earnings or a similar-looking fund that doesn’t, has a clear incentive to direct clients towards the more personally profitable one. That’s why regulators in countries such as the UK and Netherlands ban such payments. Elsewhere, it’s for the bank to show that clients get the best deal regardless.
UBS says clients have nothing to worry about: it performs “robust” due diligence when picking funds and insists commercial arrangements don’t have an impact on its decisions. Other banks have similar arrangements, and the threat of punishment should keep advisers in line. In Switzerland, failure to properly disclose retrocessions can lead to criminal conviction, not just a regulatory slap on the risk. A paper trail is therefore a must.
History suggests, though, that staying on the right side of the rules is easier said than done. Swiss asset manager GAM was fined for “failing to adequately manage conflicts of interest” with collapsed lender Greensill Capital, even though it didn’t benefit from them either. French private equity group Altaroc was criticised by regulators when it couldn’t prove that retrocessions led to an active improvement in quality of service, even if they didn’t cause any harm.
When banks get as big and sprawling as UBS, potential conflicts will inevitably arise. But a firm should think carefully about which ones are worthwhile and tolerable to their clients. Goldman Sachs has recently offered hedge fund clients ways to bet against corporate loans — even though Goldman also underwrites that kind of lending on behalf of private equity clients. The bank, with ample experience of handling delicate conflicts, presumably feels confident that compliance meetings and Chinese walls will allay any concerns.
Recent jitters in private credit markets, and redemptions at funds run by Blackstone, BlackRock and Blue Owl, show that investors in opaque and illiquid assets increasingly fear being left with losses. If that happens, they will turn to their wealth managers for answers, and advisers who were offered a cut of the funds’ performance will find those questions harder to field. UBS, meanwhile, is already fighting a separate battle with Swiss lawmakers over how strictly it should be regulated.
It’s no wonder asset managers such as Carlyle are willing to offer UBS extra incentives: its network of rich clients is enormously valuable. But the business, which made up more than half of UBS’s group profit in 2025, is performing well, its client funds growing at a double-digit clip. Conflicts or not, squeezing asset managers for a few basis points of extra profit hardly seems worth the risk of alienating important clients.
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