UBS announced that the proprietary hedge funds currently managed by Dillon Read Capital Management within its global asset management division will be moved to the investment bank.

The firm said that DRCM’s principal finance, credit arbitrage and commercial real estate businesses will be merged with relevant business lines within the investment bank. DRCM’s third party funds will be redeemed. The move comes as the bank announced a 150 million Swiss franc trading loss, which it attributed to “difficult market conditions in U.S. mortgage securities.”

UBS says it intends to work with DRCM investors to identify alternative investment opportunities for them. DRCM will continue operations until the transition period is complete which is anticipated to be in the third quarter.

Peter Wuffli, Group CEO of UBS said, “UBS remains totally committed to alternative investment offerings for our clients. However, based on an assessment of a number of factors, we concluded that the DRCM initiative did not meet our expectations. Consequently we took this decisive action, which is in the best interests of our clients and shareholders.”

“Operating a proprietary trading platform outside the investment bank and managing client money alongside became too complex and expensive. That, among other reasons, is why we have chosen to reintegrate DRCM into the investment bank and to redeem the outside investor funds,” said John Fraser, chairman and CEO of Global Asset Management.