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Custody Rules Boost Third-Party Hedge Fund Aministrators

Shaken by Bernie Madoff, investors and the SEC want hedge funds to be more forthcoming about what and where their assets are. Enter eager third-party administrators. "This used to be a trust-me business," says Charles Winkler, COO of Hudson Bay Capital Management. "Now it is trust but verify."

If this summer was a time for bankers to sit on a beach and reflect on the financial crisis, no one told Matthew Koder. UBS’s head of global capital markets got in three days in the Welsh mountains, but mostly he has been in the thick of deal making.

In August, UBS completed a 5 billion-yuan ($730 million) bond offering for China’s Tianjin Port company as sole book runner; ran a $2 billion bond offering for Australian real estate firm Westfield Group; and did a £1 billion ($1.64 billion) primary placement for London-based bank Standard Chartered. UBS is also working on Europe’s hottest deal — advising Cadbury on Kraft Foods’ unsolicited bid.

UBS’s deal-making success is all the more eye-catching because it follows two horrific years for the bank. A U.S. probe into tax evasion by clients of its private bank battered UBS’s reputation, and it suffered $40 billion in trading losses (and laid off 10,000 employees) as a result of the financial crisis. In March, UBS appointed its third CEO in two years — Oswald Gruebel, éminence grise of Swiss banking — to steady the ship.

Koder never once thought of quitting. "When I was younger I read somewhere that the world is divided into green-grassers and mountain climbers," he says. "I’m in the latter camp."

Nevertheless, Koder admits, "we were on the defensive through much of 2008." His biggest fear was that he "would wake up one morning to discover one of our clients had traded with a rival." Koder says he spent "huge amounts of time last year visiting clients, showing them that the same team was in place, that we were still the same UBS."

Koder has been an equity specialist most of his career. It began in his birthplace, Australia, when he sent a résumé to the Sydney office of Goldman, Sachs & Co. while still pursuing his banking and law studies at the University of New South Wales. He got an interview, during which a Goldman partner pointed to a white board and asked if he could write the Black-Scholes options-pricing formula. "I figured that he probably wouldn’t actually ask me to go through with it and that he probably didn’t know it himself anyway," says Koder, smiling. "So I called his bluff and said, ‘Yes.’"

It was the right call, and he landed the job, going on to work for Goldman for the next six years. Koder left in 2003 to join UBS as head of Asian equity capital markets. Under his leadership the bank went from No. 6 to No. 1 in Asian equity underwriting.

In 2005, UBS asked Koder to run global equity capital markets. Then last year the bank combined debt and equity capital markets into a single division and named Koder to run it alongside veteran Roberto Isolani. "The idea was that he had the debt market expertise," explains Koder, "but then Roberto decided to retire, so that left me." Sole head of global capital markets since June, Koder admits to being a bit outside his comfort zone, but he is not fazed. "We want to be No. 1 in equity capital market revenues in Europe and top five in our target markets in debt capital markets," he says. "We didn’t merge the two because we wanted to cut costs. It was done for revenue synergies." UBS is now No. 8 in M&A in Europe.

Koder points to Europe’s nationalized banks as a prime example of why UBS combined its capital markets divisions. "There’s some 30 banks with $100 billion of government ownership," he notes. "And that is going to start to unwind and it’s going to be with a combination of instruments — there are no single-product answers anymore."

Koder’s management duties now take him away from day-to-day deal making, but he’s hardly hands-off. When he walks to the train in the morning, he calls his colleagues in Hong Kong and soon knows about "every one of the 100 meetings they had last week." He adds, "I miss just doing deals, but you have to move forward."

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