UBP says UCITS helps it pay off New Castle clients

* UBP closed New Castle fund after Galleon-related charges

* Bank liquidated fund within 24 hours of taking control

* UCITS format ensures liquidity

By Martin de Sa'Pinto

ZURICH, Oct 23 (Reuters)- Geneva-based private bank Union Bancaire Privee (UBP) said on Friday the UCITS structure of a fund shuttered on Monday had enabled it to liquidate the fund within a day, and that it was already paying back investors.

UBP began to liquidate the fund, launched three months ago with U.S. asset manager New Castle, after New Castle general partner Mark Kurland and portfolio manager Danielle Chiesi were charged in the Galleon insider trading case. [ID:nN16545101]

"The way UBP has approached the UCITS III format allows UBP to terminate the contract immediately or to liquidate a fund and reimburse the client fully," said a spokesman for the bank.

The New Castle setback follows losses of around 1 billion Swiss francs in the Madoff fraud and a steep fall in assets under management in the company's hedge fund segment, but it indicates the group's efforts to ensure fund liquidity are paying off. [ID:nLC96837]

UBP was able to liquidate the New Castle Market Neutral US Equity Fund, a hedge fund with neutral market exposure believed by sources close to the matter to have around $55 million under management, without having to restrict investor access to their money thanks to the UCITS III structure.

This contrasts with difficulties earlier in the year when the bank sought to come to terms with investors exposed to Madoff. [ID:nN11539058] [ID:nL9346972]

The spokesman said the UCITS III format offers excellent transparency, very good liquidity and tight control of assets by the custodian, as well as being strictly regulated in the European Union, where the fund was distributed.

Almost all UBP Asset Management funds are structured on the UCITS III format, which offers daily or weekly liquidity and where UBP Luxembourg is the custodian, he said.

UBP has said it will reimburse the entire amount its clients invested, although the sources close to the matter said it suffered a very minor loss through the liquidation. The spokesman said the return of the entire amount showed UBP's commitment to investors. (Reporting by Martin de Sa'Pinto; Editing by Jon Loades-Carter)