The launch of the UBS Absolute Return Series 1 Fund makes UBS one of the latest global fund managers to offer a fund that takes different positions within the same asset class to provide both upside and downside returns and smooth volatility.
Targeting a return rate equal to inflation plus 6 per cent, the fund comprises US large cap equities (79 per cent), bonds (14 per cent) and cash/hedge offsets (7 per cent), with a derivative overlay.
“We tend to be contrarian in nature É we are again fighting the view on the street with an anti-carry posture in the portfolio,” he said, indicating it was aiming to pick up investors “when Australian equities disappoint É and they will disappoint”.
While acknowledging it is now embracing the trend in such indexing approaches by US absolute return fund managers, UBS head of global investment solutions Brian Singer believes UBS’ competitive advantage lies in its breadth of investment and risk management competencies, which allow it to select from a pool of around 75,000 different securities.
“I’m not aware of any other [manager] out there who can look at this many stocks across such diverse areas and different currencies.”
Singer said it had also unwound the fund’s exposure to emerging markets because of the current amount of interest in this area.
Singer has been astounded at the depth of global interest in this long/short portfolio approach, launching the fund to meet investor demand for better performance and more innovative allocation of investment risk.
The fund will be distributed to Australian retail investors via the UBS Wealth Management division, accessible to high-net-worth individuals and wholesale investors through platforms and institutional clients.
The fee structure will not include performance fees and is estimated to fall anywhere between 50 and 125 basis points.
“It’s priced close to traditional investments, and is similar to hedge funds [in pricing],” Singer said.
