Hammered by hedge-fund losses, UBS posted a third consecutive decline in quarterly profit, with net income sliding 7 percent in the first three months of this year.

In order to stem the losses, the Swiss bank, the world's biggest money manager, said it would close down its hedge fund, Dillon Read Capital Management. It has suffered mightily from losses in the U.S. mortgage market.

UBS said it earned 3.28 billion Swiss francs ($2.70 billion) in the first quarter, compared with 3.5 billion francs in the same period last year.

Bloomberg News notes that UBS started the hedge fund less than two years ago, partly to hang onto its former investment banking chief, John Costas. On a conference call with reporters, the bank said Costas will help shut down the hedge fund and stay at the bank as an adviser.

UBS finance chief Clive Standish said that Dillon Read president Michael Hutchins would leave the bank, Bloomberg reports. Hutchins, along with about 120 members of UBS's fixed-income division, joined Dillon Read in 2005. The unit currently has about 250 employees, most of whom will move back to the investment bank, Standish said.

This is not the first time UBS has been hurt by hedge funds. It lost $700 million in the 1998 collapse of Long-Term Capital Management.