Cantor Fitzgerald to acquire UBS hedge fund unit, expanding alternative assets

(Reuters) -U.S. brokerage firm Cantor Fitzgerald has agreed to buy UBS' hedge fund unit, it was announced on Wednesday, expanding Cantor's offering in alternative assets at a time of heightened investor interest in such products.

For the Swiss lender, the divestment of O'Connor continues the process of UBS streamlining its operations since the merger with Credit Suisse in 2023.

O'Connor's investments include alternative assets such as hedge funds, private credit and commodities. The platform will add $11 billion in invested assets to Cantor's asset management unit, per separate statements from Cantor and UBS.

"The acquisition of O'Connor is transformational for our asset management business and demonstrates our commitment to investing in attractive growth businesses," said Brandon Lutnick, chairman of Cantor, and son of former boss and current U.S. Secretary of Commerce Howard Lutnick.

The terms of the deal were not disclosed, and a Cantor spokesperson declined to comment when asked for further details. UBS said in its statement that the bank expects to recognize an immaterial gain from the sale.

Following the transaction's close, forecast to happen in the fourth quarter, UBS Asset Management and Cantor will establish a long-term commercial arrangement, which will include allowing O'Connor's products to continue to be offered to UBS' wealth management clients, the pair said.

Alternative investment products, such as private credit, have grown substantially in recent years, as investors have sought greater returns and to diversify their portfolios. In turn, financial firms have sought to gain or supplement their existing product ranges, leading to significant dealmaking involving alternatives platforms.

Having spent the last two years integrating Credit Suisse's business, UBS is awaiting details of the Swiss government's plan to make the banking sector safer, and avert the kind of forced takeover necessary for Credit Suisse after multiple scandals.

The regulator's plan, due early next month, is expected to include a call for UBS to hold more capital, something UBS executives have said will make it harder to compete against foreign rivals.

(Reporting by Ateev Bhandari and Pritam Biswas in Bengaluru, David French in New York and Oliver Hirt in Zurich. Editing By Franklin Paul)