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UBS Hedge Funds Monthly update

For qualified investors only
Swiss edition
Data as of 31st July, 2016

Global equity markets rebounded following June’s Brexit related sell-off, regaining most of the losses incurred. Market volatility began to ebb, as central banks continued with accommodative monetary policy that bolstered investor sentiment. US equities climbed on better-than-expected second quarter earnings reports. European equity markets were mainly positive, supported by some solid corporate results and reassuring macroeconomic data. The more subdued outlook for an interest rate hike by the Federal Reserve proved beneficial for emerging markets, particularly Brazil, which posted a strong gain and outperformed. Crude oil prices experienced a steep decline this month.

Hedge funds generated mostly positive results. Most equity hedged managers generated notably positive performance, as they were generally able to profit from the turnaround on equity markets. Corporate credit managers were mostly positive as well, particularly those that maintained directionally longbiased exposures. Trading managers generated mainly positive returns, whereas commodity managers with long exposure to crude oil were challenged last month.

List of funds

 

July

YTD

2015

Since launch*

Performance (net of fees)

-3.6%

-12.6%

+19.9%

+4.8%

* Since inception of strategy (01.11.2010). Performance calculation for P share class: after calculating the estimated gross-of-fee (for the period from 31.12.2014 through 27.01.2015 performance of the P/legacy share class the fee rate of the new Q/P share class is calculated back into the P/legacy share class and the two time series are combined.

  • Equity markets were making up some of the negative performance seen in June. We saw a return to risk seeking behavior with cyclical sectors outperforming, fuelled by high expectations on central bank action and investor's search for returns. The energy sector was negative, as oil prices were subdued during the month.
  • Fund performance was negative, as we saw a return to risk seeking behavior, negatively impacting fund positioning during the month. Strong rallies within the financials, notably banks, and the industrials and materials sectors impacted short positions. Longs in consumer staples detracted despite little in the way of negative news.
  • Positioning remained broadly in line at a sector level with net long to health care and consumer staples and net short to industrials and materials. Exposure to health care increased slightly, as we opened a new positioning in a US pharmaceutical company. Net exposure has remained broadly unchanged at 14% this month, as we've taken some profits but also found opportunities for new longs and shorts.

 

July

YTD

2015

Since launch on 02.06.2010

Performance (net of fees)

+1.3%

-2.4%

+0.1%

+9.4%

  • Equity hedged was the largest contributor of positive performance. Relative value was slightly positive, while trading was essentially flat. Notable contributors to performance included an Asia-focused fundamental equity hedged fund, a global fundamental equity hedged manager and a Europe-focused fundamental equity hedged fund. On the negative side, the sole detractors from performance were a global macro manager and a global merger arbitrage fund.
  • Risk assets generally produced a positive performance, as global central banks were expected to retain an accommodative monetary policy stance. In equity hedged, managers reported gains on the long sides of portfolios, while short portfolios contributed some offsetting losses.
  • Positive performance was witnessed in the technology, industrials, financials, materials and healthcare sectors, with broader Asian exposures proving particularly beneficial. Some losses were noted from index hedges, although these were not sufficient to offset gains elsewhere.

 

July

YTD

2015

Since launch on 31.03.2010

Performance (net of fees)

+0.4%

-2.1%

+1.0%

+20.5%

  • The positive return of the fund was driven by equity hedged. Equity hedged managers generally produced positive returns, as risk assets were buoyed by the expectation that global central banks would retain an accommodative monetary policy stance.
  • Gains were generally reported on the long side of portfolios, while short exposures tended to detract. Notable positive performance was reported from positions in the consumer, technology, energy and healthcare sectors, while REITs were also accretive. On the negative side, losses were generated by exposure to financials, specifically EU banks, and real estate.
  • Credit/income was essentially flat, with the month’s losses focused on asset backed strategies as short CMBX indices, and long deeper credit positions were negatively impacting performance. In reinsurance, performance consisted entirely of the "no loss" return, as there were no events of consequence. Lastly, long exposure to an Austrian financial institutional proved beneficial to one distressed manager.

Past performance of investments is not necessarily an indicator of future results. The performance shown does not take account of any commissions and costs charged when subscribing to and redeeming units.