UBS fund exposed to First Brands bankruptcy

Good morning and welcome back. In today’s newsletter:

• First Brands fallout hits Swiss banking

• Gold breaches $4,000 mark

• Global investors return to China tech

• Musk’s mission to Mars

A UBS fund has 30 per cent of its portfolio tied to the failed First Brands Group, leaving Switzerland’s largest bank grappling with a bankruptcy that has convulsed global finance.

What to know: Clients are braced for big losses after UBS O’Connor, a private credit and commodities specialist owned by the Swiss bank, revealed that 30 per cent of the exposure in one of its funds is tied to the auto parts group.

O’Connor recently told investors in its “Opportunistic” working capital finance strategy that the fund has 9.1 per cent of “direct” exposure and 21.4 per cent of “indirect” exposure. Overall, UBS has more than $500mn of exposure to First Brands’ debt and invoice-linked financing, according to bankruptcy filings.

UBS is in the process of selling O’Connor to Cantor Fitzgerald, the Wall Street brokerage whose leader, Howard Lutnick, stepped down as chair and chief executive in February.

Private credit concerns: UBS is one of many investors hurt by the implosion of the Ohio-based industrial business, which has raised questions about the dangers in the booming private credit market. The fallout over First Brands threatens to engulf the highest echelons of Swiss banking in a crisis relating to invoice finance, nearly five years after the collapse of Greensill Capital rocked Credit Suisse. Read the full story.

Here’s what else we’re keeping tabs on today:

• Nobel Prize: The award for Chemistry will be announced by the Royal Swedish Academy of Sciences in Stockholm.

• Central banks: Federal Open Market Committee’s September meeting minutes are published.

• UK: Prime Minister Keir Starmer begins a two-day trip to India. He will meet Narendra Modi tomorrow. Labour party deputy leader ballot opens following the resignation of Angela Rayner last month.

• Global economy: IMF managing director Kristalina Georgieva gives a speech for the upcoming 2025 annual meetings in Washington.

Can the global economy withstand new shocks? Take part in a live Ask an Expert Q&A with the FT’s Tej Parikh and Martin Sandbu tomorrow at 1pm BST. Submit your questions here.

Five more top stories

1. Gold has climbed above $4,000 a troy ounce for the first time. The price of bullion has surged more than 50 per cent this year, and has now doubled in less than two years. Read what’s firing up the yellow metal’s gains.

2. Exclusive: International investors are returning to China’s start-up scene, with a series of small venture capital fundraisings marking the first signs of a thaw for a sector hit by geopolitical tensions and a tech crackdown. Read the full report.

3. Exclusive: OpenAI and Anthropic are considering using investor funds to settle potential claims from multibillion-dollar lawsuits, as insurers balk at providing comprehensive coverage for the risks associated with artificial intelligence. Insurance professionals say AI model providers will struggle to secure protection for the full scale of damages.

• Market melt-up warning: Some say this is a “good” bubble, but investors should remember that all bubbles burst in the end, writes Katie Martin.

4. Belgium is under pressure from the EU to allow the use of frozen Russian assets for a “reparations loan” to Ukraine after Berlin and other western capitals shifted their stance. Here is why the Belgian government has not come on board.

5. Two of the world’s biggest bond investors have urged UK chancellor Rachel Reeves to build a larger buffer into public finances in her November Budget to avoid years of uncertainty over tax-and-spend decisions. Read more on the comments from Pimco and BlackRock.

• Conservative conference: Party leader Kemi Badenoch will try to revive Tory fortunes with a speech focused on the economy and a promise to drive down Britain’s deficit.

• Tax bonanza: Ireland has boosted overall spending by more than 7 per cent in next year’s budget compared with this year, despite central bank warnings over excessive outlays.

The Big Read

Central banks are attempting to unwind purchases of bonds and other assets at a time of political criticism of monetary authorities over the scale of losses. Will the controversy over quantitative easing limit their options for future crises?

We’re also reading and listening to . . . 

• USAID cuts: Zambia’s president has said reductions to international assistance were “long overdue” and offered African nations an opportunity to “take care of our own affairs”.

• Cross-channel rail: Eurostar’s monopoly should end, argues John Gapper. Competition is needed, and the best way to achieve it is to incentivise new entrants to invest.

• Low-cost funds: St James’s Place, the UK’s largest wealth manager, is rolling out cheaper investments after a shake-up of its charging structure.

• Tech Tonic 🎧: Elon Musk wants humans to settle on Mars. The FT’s space industry editor Peggy Hollinger speaks to experts about the pull of the red planet.

Chart of the day

Cocoa prices have tumbled to a 20-month low, bringing to an end a two-year rally that had driven the market to record highs and squeezed chocolate manufacturers worldwide. But should consumers start celebrating?

Take a break from the news . . . 

London’s British Museum will stage a £2,000-a-head ball next week, and its director Nicholas Cullinan promises a fundraiser like no other. But in tough economic times, is it a good look for a national museum to court the wealthy in their finery, Melanie Gerlis asks.