Swiss Banking News: October 2007

10.10.2007 On October 8, 2007, Credit Suisse announce the launch of its latest index in the HOLTSelectTM series - global HS Market Neutral Index. HS Market Neutral Index offers provides investors with the opportunity to invest neutral strategy with low correlation to other asset classes in a rules-based market. Also, it reduces market risk as it ensures sector and region neutrality. To identify key investment opportunities, the index uses Credit Suisse's HOLT framework and provides gives access to HOLT's database of over 18 000 stocks from more than 55 countries. To construct the index, an initial universe of the top 275 North American, 300 European and 175 Japanese stocks is applied by market cap. Then, the universe is divided into 10 sectors that include financials, energy, information technology, telecoms, health care, materials, consumer discretionary, industrials, consumer staples and utilities. The top ranking 10% of each sector are taken. Then, the universe is divided into 50 sector and region categories, using 5 currency regions and the 10 above-mentioned sectors. The resulting index has an equal number of long and short stocks. It also ensures that there is no sector, regional or currency bias. Calculated by Standard & Poor's and rebalanced on a quarterly basis, the HS Market Neutral Index has a compounded annual return of 11.6% since January 1996. The index has delivered positive excess returns in 81% of quarters.

06.10.2007 The president of UBS made a public announcement to admit that it had underestimated the crisis in the US subprime home loans credit market. He also informed that 2 top executives paid for this underestimation with their jobs. UBS president, Marcel Ospel, said that the bank had over-invested in subprime-related instruments. According to him, the bank pooorly evaluated the impact of changing interest rates in the US, and this poor evaluation triggered the problems in US mortgage sector. According to Marcel Ospel, the problems started with the last change in interest rates and then they were compounded by bank's Dillon Read Capital Management hedge fund incorporated into UBS's investment arm and closed in May. DRCM had racked up CHF 380 million (USD 325 million) in losses in the United States high-risk, or subprime, mortgage market before then. UBS announced a hit of CHF 4 billion (USD 3.4 billion) from its losses in the form of worthless subprime investments.