
Executive summary
Market context
Risk assets generated mostly positive performance in August. After an uneven July, markets rallied to start the period boosted by forecasts of a reduced likelihood of a September rate hike from the US Federal Reserve which boosted the broader equity market. Market momentum stalled during the second half of the month in the wake of renewed hostilities in the Middle East as well as rising rate hike odds in the wake of Jackson Hole comments from Fed Chairman Warsh. US markets posted positive performance with the Dow Jones, S&P500 and NASDAQ rallying 1.34%, 2.62% and 3.93%, respectively. European indices also posted positive performance as the MSCI Europe, DAX and FTSE produced gains of 0.26%, 2.45% and 0.10%, respectively. Asian developed markets generated positive results with the Nikkei 225 producing a gain of 3.03%. Emerging market indices produced mixed performance in August. Chinese markets rallied 4.02% while Indian and Brazilian markets fell 1.46% and 0.33% respectively. In US interest rate markets, yields rose in reaction to continued expectations for tighter monetary policy. The two-year US Treasury yield moved higher to 4.34% from 4.28% and the ten-year US Treasury yield moved higher to 4.79% from 4.75%. The Barclays US Corporate Investment Grade Index rose 0.43% and the Barclays US Corporate High Yield Index gained 0.97%, where carry income and spread movement offset the modest rise in yields. Commodity prices were mostly higher as a result of ongoing geopolitical strains with gold rallying 9.1% while oil rose 5.2% (WTI). In currency markets, the Euro rallied 0.56% against the US Dollar to 1.1588 from 1.1523, while the US Dollar rose 0.40% against the Japanese Yen from 159.24 to 159.87.
Sources: Pound Sterling Live, Exchange Rates UK, U.S. Department of the Treasury, Bloomberg, Gold Price, Business Insider. Historical performance indications and financial market scenarios are not reliable indicators of future performance.
Hedge fund highlights
Equity Hedge: Equity Hedge strategies were the main detractor in August, pressured by biotech weakness, idiosyncratic positioning and late-month geopolitical tensions, which reversed early gains and reduced net exposure.
Relative Value / Event Driven: Relative Value strategies delivered modest positive returns, supported by quantitative equity, fixed income relative value and agency MBS carry, despite losses in capital structure arbitrage amid convertible bond volatility compression.
Credit / Income: Credit / Income strategies were broadly flat, with carry from asset-backed, agency and short-duration private credit offset by muted corporate long / short results and weaker interest rate markets.
Trading / Macro: Trading / Macro strategies delivered positive returns, supported by directional interest rate exposure, asset swaps and equity themes, while long positions in rare earth metals, energy and agriculture benefited from geopolitical tensions.
Key takeaways for allocators
- Positive markets, negative performance: Biotech weakness, idiosyncratic positioning and late-month geopolitical tensions weighed on Equity Hedged returns.
- Geopolitics and tighter policy expectations remained key risks: Middle East tensions, rising oil prices and hawkish Fed guidance sustained elevated Treasury yields.
- Carry and relative value exposures improved portfolio resilience: Agency MBS, asset-backed, agency and short-duration private credit carry, quantitative equity, and fixed income relative value trades provided positive contributions.
- Commodity and macro diversification added value: Directional interest rate positioning, asset swaps, equity themes, and long exposures to rare earth metals, energy and agriculture supported Trading strategy performance.
Performance snapshot (in %)
| Index | 26-Aug | 26-Jul | 26-Jun | QTD | YTD | 1Y Annualized Return | 3Y Annualized Return | 5Y Annualized Return | 10Y Annualized Return | 10Y Volatility |
|---|---|---|---|---|---|---|---|---|---|---|
MSCI World Total Return - Net USD | 2.58 | 0.51 | -0.72 | 3.1 | 13.1 | 20.37 | 20.11 | 11.21 | 13.01 | 14.86 |
FTSE US Broad Investment-Grade Bond Index | 0.39 | -1.3 | 0.22 | -0.92 | -0.27 | 1.9 | 4.12 | -0.33 | 1.41 | 5.11 |
Barclays Global High Yield Index | 1.04 | -0.28 | 0.2 | 0.75 | 2.91 | 5.92 | 10.39 | 4.24 | 4.98 | 8.19 |
Bloomberg Commodity Index Total Return | 7.39 | 7.54 | -8.54 | 15.48 | 32.06 | 42.79 | 15.13 | 12.22 | 8.12 | 14.07 |
ICE BofA Merrill Lynch 3-month T-Bill Total Return Index (G0O1) | 0.28 | 0.33 | 0.29 | 0.61 | 2.37 | 3.71 | 4.56 | 3.65 | 2.4 | 2.02 |
HFRI Fund of Funds Composite Index | 0.46 | -1.69 | 1.13 | -1.6 | 6.83 | 12.15 | 9.78 | 5.32 | 5.58 | 5.13 |
HFRI Equity Hedge (Total) Index | 1.46 | -1.85 | 0.71 | -0.69 | 8.7 | 14.78 | 14.1 | 7.31 | 8.66 | 8.91 |
HFRI Event-Driven (Total) Index | 0.15 | -1.77 | 1.5 | -0.65 | 6.4 | 9.59 | 10.79 | 6.4 | 6.95 | 7.01 |
HFRI ED: Credit Arbitrage Index | 1.63 | -0.15 | 0.05 | 1.67 | 4.13 | 7.18 | 9.13 | 6.26 | 6.66 | 6.63 |
HFRI Macro (Total) Index | 4.11 | -0.34 | -1.39 | 3.82 | 10.3 | 17.62 | 7.74 | 6.17 | 4.71 | 5.17 |
HFRI Macro: Systematic Diversified Index | 3.45 | -0.94 | -1.1 | 2.5 | 12.14 | 19.35 | 4.24 | 4.29 | 3.03 | 7.65 |
HFRI Relative Value (Total) Index | 0.28 | 0.24 | 0.22 | 0.39 | 4.14 | 6.7 | 7.81 | 5.46 | 5.22 | 4.19 |
Strategy performance

Source: UGA - Hedge Funds, Bloomberg, Barclays (Lehman) Live, HFR. For illustrative purpose only. As of August 31, 2026. Historical performance indications and financial market scenarios are not reliable indicators of future performance. Please note that the composition, methodology, and reported values of the HFRI Index are subject to periodic updates and revision by Hedge Fund Research, Inc.
Monthly hedge fund review
Overall market commentary
August was a flat to modesty positive month for the UGA-HF platform. Equity Hedged strategies were challenged despite a generally constructive equity market environment. However, most other strategies delivered positive results amid a more muted macroeconomic environment for many sub-strategies, as evidenced by declining index volatility during the month. The month began with a broad recovery of the beta rally that had characterized most of the year. However, the resumption of hostilities in the Middle East, the US national debt surpassing USD 40 trillion, and the subsequent rise in oil prices tempered investor enthusiasm. These concerns overshadowed the positive impact of strong earnings from AI and technology leadership. These dynamics also contributed to increased investor interest in US dollar alternatives such as gold and bitcoin. Furthermore, the more hawkish comments from Fed Chairman Warsh at Jackson Hole kept Treasury yields near multi-decade highs despite Treasury Department’s announced buyback operations under US Treasury Secretary Bessent.
Source returns: UGA - Hedge Funds, Bloomberg, Barclays (Lehman) Live, HFR. As of August 31, 2026. Historical performance indications and financial market scenarios are not reliable indicators of future performance. For information purposes only. No investment advice or a recommendation to buy or sell any securities. This does not constitute a guarantee by UBS Asset Management.
Equity Hedged
HFRI Equity Hedge Total Index:
MTD 1.46% / QTD -0.69% / YTD 8.70%
MTD 1.46% / QTD -0.69% / YTD 8.70%
Equity Hedged strategies generally produced negative returns in August. Although most market indices finished the month in positive territory, the platform was challenged by pronounced weakness in sectors such as biotech, where results were driven by idiosyncratic positioning.
More broadly, there was significant dispersion across both sector and factor performance. The realized correlation in the S&P fell close to zero, which normally was suggestive of alpha generation and a fertile stock picking environment. Despite these conditions, manager performance was mixed. Early gains were largely reversed during the latter part of the period following the re-escalation of tensions in the Middle East.
This drove energy prices higher, with defensive sectors, particularly healthcare and pharmaceuticals, outperforming the broader market. Hedge fund’s overall net exposure declined, while gross exposures remained somewhat elevated.
Technical factors were also mixed as retail participation softened despite August historically being a strong month for retail inflows, while hedge funds were net sellers. In a reversal from July, European equity markets underperformed relative to the US and Asia.
The overall risk climate remained constructive given the level of VIX and the modest length carried by the market. Nevertheless, investors remained mindful of historical seasonality, as September had traditionally been a more challenging month for equities, particularly during US midterm election years.
Relative Value
HFRI Relative Value Total Index:
MTD 0.28% / QTD 0.39% / YTD 4.14%
MTD 0.28% / QTD 0.39% / YTD 4.14%
Relative Value strategies generated modestly positive performance in August. Quantitative equity strategies delivered positive results, extending the gains from July. Capital structure arbitrage strategies incurred modest losses, with performance primarily impacted by the weakness across the convertible bond landscape due to volatility compression, particularly within the AI / technology arena.
Fixed income relative value strategies produced positive performance, driven by directional macro positioning and macro RV trades. Agency MBS strategies were slightly positive as carry income was the primary contributor.
Credit / Income
HFRI ED: Credit Arbitrage Index:
MTD 1.63% / QTD 1.67% / YTD 4.13%
MTD 1.63% / QTD 1.67% / YTD 4.13%
Credit / Income strategies generated relatively flat returns in August. Interest rate markets were modestly weaker despite efforts by the US Treasury and Federal Reserve to alleviate investor concerns surrounding deficits, longer term bond yield and inflation.
Corporate long / short strategies produced muted results. Carry themes across asset-backed, agency and short duration private credit sub-strategies contributed positively to performance.
Trading
HFRI Macro Total Index:
MTD 4.11% / QTD 3.82% / YTD 10.30%
MTD 4.11% / QTD 3.82% / YTD 10.30%
Trading strategies produced positive performance in August. Both developed and emerging market macro strategies benefited from directional interest rate exposure, particularly in Japan, as well as gains from asset swaps and equity-related themes.
Commodity strategies generally produced positive results with most managers having long positions across rare earth metals, energy and agriculture, which benefited from the heightened geopolitical tensions in the Middle East.
Source: UGA - Hedge Funds, HFR. For illustrative purpose only. As of August 31, 2026. Historical performance indications and financial market scenarios are not reliable indicators of future performance. Please note that the composition, methodology, and reported values of the HFRI Index are subject to periodic updates and revisions by Hedge Fund Research, Inc. This does not constitute a guarantee by UBS Asset Management.
This document has been prepared by UBS Asset Management (Americas) LLC, acting through Unified Global Alternatives - Hedge Funds (“UGA - Hedge Funds” or “UGA - HF”), a provider of hedge fund strategies. It contains UGA - Hedge Funds' view of market events during the specified period and all such information and opinions are subject to change without notice, and does not pertain specifically to products managed or advised by UGA - Hedge Funds. The materials are provided for information purposes only and do not constitute investment advice. The information contained herein is believed to be reliable but its accuracy is not guaranteed. This publication encompasses UGA - Hedge Funds’ views based on our internal manager universe and are subject to change. The universe includes managers that are either invested in or followed by UGA - Hedge Funds and does not represent all hedge fund managers and strategies available in the industry. Any indices shown throughout this report are for illustrative purposes only and not a representation of UGA - Hedge Funds universe performance.
C-09/26 M-006890
Endnotes
Archive
HFS Bulletin
- Monthly hedge fund update – July 2026
- Monthly hedge fund update – June 2026
- Monthly hedge fund update – May 2026
- Monthly hedge fund update – April 2026
- Monthly hedge fund update – March 2026
- Monthly hedge fund update – February 2026
- Monthly hedge fund update – January 2026
- Monthly hedge fund update – December 2025
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- Monthly hedge fund update – August 2025
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- Monthly hedge fund update – December 2024
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- Monthly hedge fund update – July 2024
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- Monthly hedge fund update – May 2024
- Monthly hedge fund update – April 2024
- Monthly hedge fund update – March 2024
