
Executive summary
Market context
Risk assets generated mixed performance in July. The multi-month rally in the AI / Technology sector reversed during the month, resulting in broadly uneven returns across the equity market and a shift in market leadership. Corporate earnings were generally supportive of the overall risk climate, while the latest US Federal Reserve minutes resulted in a spike in short-dated interest rate volatility despite some dampening of expectations for a September interest rate hike. US markets posted mixed performance with the Dow Jones gaining 0.32%, while the S&P500 and NASDAQ fell -0.13% and -3.20%, respectively. European indices mostly outperformed other regions as the MSCI Europe, DAX and FTSE produced gains of 0.90%, 2.53% and 3.57%, respectively. Asian developed markets generated negative results with the Nikkei 225 producing a loss of -8.14%. Emerging market indices produced mixed performance in July as Brazilian and Indian markets rallied 3.47% and 2.11%, respectively. Conversely, Chinese markets fell -6.40%. In US interest rate markets, yields rose in reaction to continued inflation pressures as well as expectations for potentially tighter monetary policy later in the year. The two-year US Treasury yield moved higher to 4.28% from 4.14% and the ten-year US Treasury yield moved higher to 4.75% from 4.44%. The Barclays US Corporate Investment Grade Index fell -1.67% and the Barclays US Corporate High Yield Index declined 0.25%, generally in line with the move in US Treasuries. Commodity prices were mostly higher as gold gained 0.2% while oil rose 22.2% (WTI). In currency markets, the Euro rallied 0.96% against the US Dollar to 1.1530 from 1.1420, while the US Dollar fell -2.01% against the Japanese Yen from 162.51 to 159.24.
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 July, pressured by momentum reversals, AI/technology weakness, and de-risking, with Asia challenged while European managers proved more resilient.
Relative Value / Event Driven: Relative Value / Event Driven strategies were slightly positive, supported by quantitative equity and merger arbitrage gains, though convertibles, fixed income relative value, and agency MBS were mixed amid volatility and rate moves.
Credit / Income: Credit / Income delivered modest positive returns, helped by carry-oriented asset-backed, agency, and short-duration private credit exposures, despite weaker corporate long/short results.
Trading / Macro: Trading / Macro strategies were mixed, with rates and USD positioning weighing on managers, while commodities - particularly base metals and rare earths - provided a positive offset.
Key takeaways for allocators
- AI and momentum reversal drove losses: The sharp unwind in AI/technology and momentum positioning was the main driver of losses, particularly within Equity Hedged strategies and Asia-focused exposures.
- Broader market leadership: Corporate earnings and growth indicators supported non-technology areas of the market, contributing to greater dispersion across sectors, regions and managers.
- Rates & macro pressure: Hawkish Fed messaging, elevated inflation and interest rate volatility weighed on rate-sensitive and directional macro exposures across Relative Value, Credit / Income and Trading strategies.
- Carry and commodities resilience: Carry-oriented credit exposures, merger arbitrage, quantitative equity and commodity positions in base metals and rare earth materials provided pockets of positive performance.
Performance snapshot (in %)
| Index | Jul-26 | Jun-26 | May-26 | QTD | YTD | 1Y Annualized Return | 3Y Annualized Return | 5Y Annualized Return | 10Y Annualized Return | 10Y Volatility |
|---|---|---|---|---|---|---|---|---|---|---|
MSCI World Total Return - Net USD | 0.51 | -0.72 | 4.55 | 0.51 | 10.26 | 20.41 | 18.14 | 11.19 | 12.73 | 14.86 |
FTSE US Broad Investment-Grade Bond Index | -1.30 | 0.22 | 0.34 | -1.30 | -0.66 | 2.73 | 3.75 | -0.44 | 1.36 | 5.11 |
Barclays Global High Yield Index | -0.28 | 0.20 | 0.70 | -0.28 | 1.85 | 6.44 | 9.83 | 4.16 | 5.06 | 8.20 |
Bloomberg Commodity Index Total Return | 7.54 | -8.54 | -3.56 | 7.54 | 22.98 | 35.53 | 12.14 | 10.57 | 7.16 | 13.93 |
ICE BofA Merrill Lynch 3-month T-Bill Total Return Index (G0O1) | 0.33 | 0.29 | 0.30 | 0.33 | 2.08 | 3.82 | 4.61 | 3.59 | 2.37 | 2.02 |
HFRI Fund of Funds Composite Index | -1.69 | 0.56 | 3.08 | -1.69 | 6.65 | 13.65 | 9.67 | 5.55 | 5.61 | 5.12 |
HFRI Equity Hedge (Total) Index | -1.85 | 1.26 | 2.70 | -1.85 | 7.44 | 16.99 | 13.07 | 7.40 | 8.68 | 8.90 |
HFRI Event-Driven (Total) Index | -1.77 | 1.23 | 2.07 | -1.77 | 5.20 | 10.26 | 10.54 | 6.52 | 7.11 | 7.04 |
HFRI ED: Credit Arbitrage Index | -0.15 | -1.38 | 1.63 | -0.15 | 2.27 | 6.06 | 8.69 | 5.90 | 6.52 | 6.63 |
HFRI Macro (Total) Index | -0.34 | -1.49 | 0.17 | -0.34 | 5.88 | 14.73 | 6.08 | 5.27 | 4.10 | 5.07 |
HFRI Macro: Systematic Diversified Index | -0.94 | -1.42 | -0.45 | -0.94 | 8.37 | 16.60 | 2.75 | 3.34 | 2.30 | 7.64 |
HFRI Relative Value (Total) Index | 0.24 | 0.25 | 0.60 | 0.24 | 3.99 | 7.39 | 7.89 | 5.53 | 5.29 | 4.20 |
Strategy performance

Source: UGA - Hedge Funds, Bloomberg, Barclays (Lehman) Live, HFR. For illustrative purpose only. As of July 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
July was a broadly negative month for the UGA – HF platform. Equity Hedged strategies incurred majority of the losses during the period, while most other strategies delivered more muted to mixed results. The beta rally that began at the start of Q2 stalled as market leadership shifted amid a reevaluation of the broader AI/technology theme. Despite a fairly elevated volatility across several market segments, top-line index performance, as measured by S&P500, was relatively subdued. Q3 earnings provided support to the fundamental story around risk assets, while the hawkish tone of the US Federal Reserve contributed to a more cautious investor backdrop. The retreat in bond yield across the US Treasury curve reflected the likelihood of monetary policy tightening this year as inflation pressure remains stubbornly above the Fed target. Additionally, the reduced transparency from the new Fed Chair yielded an increase in interest rate volatility. European equity markets outperformed given their lower weighting to technology, while results across the US and Asia were more challenged. Overall, investor sentiment seemed more balanced as hedge funds took down overall risk levels, although retail investors appeared to remain buyers on dips.
Source returns: UGA - Hedge Funds, Bloomberg, Barclays (Lehman) Live, HFR. As of July 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 -1.85% / QTD -1.85% / YTD 7.44%
MTD -1.85% / QTD -1.85% / YTD 7.44%
Equity Hedged strategies produced broadly negative returns in July. Although the S&P 500 index was relatively flat, there was significant dispersion across industry sectors, along with a sharp increase in factor volatility. The sharp reversal in momentum, weighed heavily on AI/technology positioning across the hedge fund landscape. The broader market, outside of technology and the NASDAQ, experienced support from corporate earnings and positive growth indicators amid the change in market leadership. Geopolitical dynamics remained fluid as Middle East negotiations continued, although some renewed hostilities spiked energy prices again.
Technical factors also provided some headwinds in the wake of the much-anticipated SpaceX IPO, which experienced share prices fall sharply after a brief post-issue rally. Hedge funds were also quite active in unwinding gross exposure in the wake of the record volatility in the momentum space bringing net leverage well below the recent highs. Asia was a notable underperformer during July where leveraged positions in the AI / technology-related space, as well as other strategies, came under strong selling pressure after a record runup to start the first half of the year.
European managers outperformed via industrials and aerospace exposure, while they generally reduced exposure to AI/technology and momentum factors.
Relative Value
HFRI Relative Value Total Index:
MTD 0.24% / QTD 0.24% / YTD 3.99%
MTD 0.24% / QTD 0.24% / YTD 3.99%
Relative Value strategies produced slightly positive performance in July. Quantitative equity strategies delivered positive results, rebounding from a weak June. Convertible bond strategies delivered mixed returns, as market volatility and the retreat in bond yields, with multi-decade highs in the US 30-year Treasury bond, proved challenging.
Fixed income relative value strategies also produced mixed results as weakness across more directional macro themes likely offset gains from more traditional relative value positioning. Agency MBS strategies were mixed as carry income tended to be offset by moves in the mortgage basis. Lastly, merger arbitrage strategies were mostly positive in July.
Credit / Income
HFRI ED: Credit Arbitrage Index:
MTD -0.15% / QTD -0.15% / YTD 2.27%
MTD -0.15% / QTD -0.15% / YTD 2.27%
Credit / Income strategies produced modestly positive returns in July. Interest rate markets were weaker across the curve as expectations remained for an interest rate hike given that US inflation is running above target.
Corporate long / short strategies produced mixed to negative given the overall long bias profile. Carry themes across asset-backed, agency and short duration private credit sub-strategies contributed positively to performance.
Trading
HFRI Macro Total Index:
MTD -0.34% / QTD -0.34% / YTD 5.88%
MTD -0.34% / QTD -0.34% / YTD 5.88%
Trading strategies were mixed in July. Both developed and emerging market macro strategies were challenged given their long-biased profile in interest rates and the USD. Results across equities were more idiosyncratic given the level of dispersion across the equity landscape.
Commodity strategies generally produced positive results with most managers having long positions across base metals and select rare earth materials. Lastly, strategies across natural gas and power trading were generally mixed.
Source: UGA - Hedge Funds, HFR. For illustrative purpose only. As of July 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-08/26 M-006314
Endnotes
Archive
HFS Bulletin
- 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
- Monthly hedge fund update – November 2025
- Monthly hedge fund update – October 2025
- Monthly hedge fund update – September 2025
- Monthly hedge fund update – August 2025
- Monthly hedge fund update – July 2025
- Monthly hedge fund update – June 2025
- Monthly hedge fund update – May 2025
- Monthly hedge fund update – April 2025
- Monthly hedge fund update – March 2025
- Monthly hedge fund update – February 2025
- Monthly hedge fund update – January 2025
- Monthly hedge fund update – December 2024
- Monthly hedge fund update – November 2024
- Monthly hedge fund update – September 2024
- Monthly hedge fund update – August 2024
- Monthly hedge fund update – July 2024
- Monthly hedge fund update – June 2024
- Monthly hedge fund update – May 2024
- Monthly hedge fund update – April 2024
- Monthly hedge fund update – March 2024
