The pre-goodwill cost/income ratio was 73% in third quarter 2003, up from 71% in second quarter. Increased revenues from higher performance fees and asset-based revenues, which rose on the back of improving financial markets, were offset by the rise in overall expenses.
Institutional
Institutional invested assets were CHF 305 billion on 30 September 2003, up from CHF 297 billion on 30 June 2003, reflecting strong net new money inflows and positive market movements that more than offset the effect of the stronger Swiss franc.
Net new money was CHF 6.3 billion in third quarter 2003, up from CHF 1.1 billion in second quarter, and our best result since 2000. Inflows into alternative investments, particularly into funds of hedge funds, equity and asset allocation mandates more than offset the impact of the CHF 0.9 billion outflow from lower margin money market funds. Positive inflows into equity mandates were recorded in all regions, particularly in the UK and US, with additional strong inflows into asset allocation mandates in the UK.
The gross margin, at 34 basis points in third quarter 2003, was slightly lower than the second quarter gross margin of 35 basis points due to lower seed capital gains.
Wholesale Intermediary
Invested assets were CHF 267 billion on 30 September 2003, down from CHF 270 billion on 30 June 2003. Positive financial market developments were more than offset by net new money outflows and the depreciation of the US dollar against the Swiss franc.
Strong inflows in Asian and European fixed income mandates were offset by money market outflows of CHF 7.2 billion. Approximately half the money market outflow was related to the launch of UBS Bank USA (for more information, please refer to the sidebar in our second
quarter 2003 report on page 44). The current low interest rate environment has also prompted net outflows, and total investments in money market funds dropped from CHF 107 billion on 30 June 2003 to CHF 102 billion on 30 September 2003.
In the US, the Investment Company Institute reported industry-wide net outflows of USD 80.2 billion in third quarter 2003, mainly out of money market funds. In Switzerland, Lipper, a Reuters company, recorded net outflows of CHF 0.8 billion in third quarter 2003, primarily due to CHF 2.1 billion in outflows from money market funds.
The gross margin was 32 basis points in third quarter 2003, a two basis point increase from second quarter, reflecting our business mix changing towards higher margin assets.
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