UBS Unified Global Alternatives team

Executive summary

Market context

Risk assets generated mixed performance in September. During the month, the shifting expectations for US interest rate policy, heightened uncertainty in the Middle East and a strong US Dollar provided headwinds for markets. The sharp move in global bond yields also undermined investor confidence. US equity markets posted mixed performance with the Dow Jones and S&P500 declining -4.29% and -0.45%, respectively. Conversely, the NASDAQ posted a gain of 1.86% as AI tailwinds led to outperformance. European equity indices posted negative performance as the MSCI Europe, DAX and FTSE produced losses of -2.46%, -4.03% and -1.95%, respectively. Asian developed markets generated positive results with the Nikkei 225 producing a gain of 0.67%, outperforming other regions. Emerging market equity indices produced mixed performance in September. Brazilian markets rallied 5.03% while Indian and Chinese markets fell -5.82% and -3.62%, respectively. In US interest rate markets, yields rose sharply in reaction to expectation for multiple interest rate hikes from the US Federal Reserve. The two-year US Treasury yield moved higher to 4.88% from 4.34% and the ten-year US Treasury yield rose to 5.29% from 4.79%. The Barclays US Corporate Investment Grade Index fell -2.72% and the Barclays US Corporate High Yield Index declined -2.52%, where carry income was more than offset by the back up in bond yields. Commodity prices were mixed, impacted by both the strength in US Dollar and ongoing geopolitical developments. Gold fell -6.6%, while oil rose 7.6% (WTI). In currency markets, the Euro weakened 2.24% against the US Dollar to 1.1328 from 1.1588, while the US Dollar fell 1.71% against the Japanese Yen from 159.87 to 157.13.

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 Hedged strategies produced mixed returns in September, with pronounced manager dispersion. Weakness in biotech short positioning and financials offset gains from renewed AI / technology leadership and stronger Asian markets.

Relative Value / Event Driven: Relative Value strategies delivered modestly negative returns, with higher yields and shifting curves weighing on quantitative equity, capital structure arbitrage and agency MBS.

Credit / Income: Credit / Income strategies generated slightly positive returns. Carry across asset-backed, agency and short-duration private credit contributed, while corporate long / short results were muted and wider spreads had limited impact due to low directional exposure.

Trading / Macro: Trading / Macro strategies produced mixed returns. Higher developed-market bond yields challenged macro positioning, partially offset by gains in European front-end rates and positive commodity themes across rare earth metals, natural gas and crude oil; while gold positions likely detracted. 

Key takeaways for allocators

  • Higher yields created broad headwinds: The post-FOMC rise in bond yields challenged Equity Hedged, Relative Value and developed-market Macro strategies, particularly in rate-sensitive sectors and fixed income trades.
  • Dispersion and narrow leadership increased selection risk: AI / technology and Asian equities outperformed, while biotech, financials, small caps, utilities, REITs and Europe were weaker, driving significant variation across managers.
  • Low directional exposure and carry supported resilience: Wider credit spreads had limited platform impact, while asset-backed, agency and short-duration private credit carry contributed positively.
  • Commodity diversification remained selective: Rare earth metals, natural gas and crude oil themes added value, while US Dollar strength and the decline in gold created offsets.  

Performance snapshot (in %)

Index 26-Sep 26-Aug 26-Jul QTD YTD 1Y Annualized Return 3Y Annualized Return 5Y Annualized Return 10Y Annualized Return 10Y Volatility

MSCI World Total Return - Net USD

-1.19

2.58

0.51

1.88

11.75

15.24

21.4

11.89

12.81

14.88

FTSE US Broad Investment-Grade Bond Index

-2.65

0.39

-1.3

-3.54

-2.91

-1.88

4.07

-0.68

1.14

5.18

Barclays Global High Yield Index

-2.96

1.04

-0.28

-2.24

-0.14

2.1

9.88

3.85

4.58

8.26

Bloomberg Commodity Index Total Return

0.61

7.39

7.54

16.19

32.87

40.64

15.63

11.27

7.85

14.05

ICE BofA Merrill Lynch 3-month T-Bill Total Return Index (G0O1)

0.27

0.28

0.33

0.89

2.65

3.65

4.49

3.7

2.42

2.02

HFRI Fund of Funds Composite Index

-0.38

0.85

-2.12

-1.66

6.78

10.14

9.92

5.21

5.5

5.14

HFRI Equity Hedge (Total) Index

-1.87

1.82

-2.12

-2.2

7.06

10.18

14.21

7.1

8.36

8.95

HFRI Event-Driven (Total) Index

-1.79

0.47

-0.8

-2.12

4.83

7.07

10.43

6.27

6.81

7.04

HFRI ED: Credit Arbitrage Index

-1.44

0.91

0.04

-0.5

1.9

4.21

8.17

5.82

6.32

6.65

HFRI Macro (Total) Index

2.73

3.08

-0.27

5.6

12.19

16.18

7.91

6.49

4.93

5.16

HFRI Macro: Systematic Diversified Index

4.57

2.89

-0.92

6.61

16.64

20.19

4.91

5.17

3.53

7.74

HFRI Relative Value (Total) Index

-1.14

0.29

0.11

-0.74

2.97

4.45

7.27

5.09

5

4.22

Source returns: UGA - Hedge Funds, Bloomberg, Barclays (Lehman) Live, HFR. As of September 30, 2026. These figures are net of all fees in USD. 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.

Strategy performance

Chart compares MTD and YTD returns across 12 indices; Bloomberg Commodity leads at 0.6% MTD and 32.9% YTD.

Source: UGA - Hedge Funds, Bloomberg, Barclays (Lehman) Live, HFR. For illustrative purpose only. As of September 30, 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.

Strategy performance as of September 30, 2026. Historical performance indications and financial market scenarios are not reliable indicators of future performance.

Monthly hedge fund review

Overall market commentary

September was a flat to modesty positive month for the UGA – HF platform. Equity Hedged strategies faced some headwinds from sharply higher bond yields, concerns of additional near-term monetary tightening in the US and rising crude oil prices. Performance across other strategies was mixed, with overall results fairly muted as index level volatility remained steady. Interest rates were the dominant theme during the month, where there was a negative correlation between stocks and bond yields following the FOMC meeting. The moves into US Dollar alternatives witnessed in prior months were largely reversed with strength in the US Dollar and weakness in gold. While exposure levels across hedge funds remained subdued despite the upward trend in equities, some risk assets were at or near all-time highs, while headwinds were experienced across other asset classes.

Source returns: UGA - Hedge Funds, Bloomberg, Barclays (Lehman) Live, HFR. As of September 30, 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 -1.87% / QTD -2.20% / YTD 7.06%

Equity Hedged strategies produced mixed returns in September, with manager performance again reflecting significant dispersion. The NASDAQ advanced to new highs, while the broader S&P was essentially flat.

The interest rate landscape provided challenges to certain sectors, particularly those sensitive to higher rates and oil, including small caps, homebuilders, utilities and REITs. Conversely, sectors linked to earnings growth, primarily AI / technology, outperformed, resulting in a lack of market breadth.

September also highlighted the continued volatility of momentum-driven factors, which recovered further from the July trough. From a valuation standpoint, P/E multiples retraced to approximately the midpoint of their ten-year average, potentially providing a floor for some sectors.

The resumption of technology leadership was driven in part by growing enthusiasm surrounding AI agents for consumers. As of the end of September year-to-date, this sector proved to be the most resilient against the backdrop of higher interest rates.

The UGA – HF platform was challenged by pronounced weakness in biotech, where results were driven primarily by specific short-side positioning. The shifting yield curve and forward-looking interest rate outlook were also headwinds for financials, which detracted from overall platform performance.

Asian markets continued to outperform other regions but appeared to remain underweight in many portfolios, despite attractive forward-looking price targets. In terms of flows, non-US investors continued to add to long positions in US equities.

Conversely, Europe underperformed again in September due to its limited AI / technology exposure and increased attention to sovereign debt.

Technical factors were mixed but appear more supportive going forward. Net exposure was trimmed by both the leveraged community and the long-only cohort.

Relative Value

HFRI Relative Value Total Index:
MTD -1.14% / QTD -0.74% / YTD 2.97%

Relative Value strategies produced modestly negative performance in September. Quantitative equity strategies delivered negative results but remained favored as a diversifying approach. Capital structure arbitrage strategies also experienced losses, with results driven primarily by wider credit spreads and higher bond yields.

Fixed income relative value strategies produced mixed performance amid a diminishing opportunity set.

Macro directional and macro RV trades were generally challenged by shifts in the yield curve and higher long-end interest rates.

Agency MBS strategies were mostly negative for the month.

Credit / Income

HFRI ED: Credit Arbitrage Index:
MTD -1.44% / QTD -0.50% / YTD 1.90%

Credit / Income strategies produced slightly positive returns in September. Corporate long / short strategies produced muted results.

Long-end bond yields rose following the US Federal Reserve’s rate hike and expectations of further tightening. Credit spreads also widened during the month, although the impact on the platform was minimal given its low directional exposure.

Carry themes across asset-backed, agency and short-duration private credit sub-strategies generally contributed positively to performance.

Trading

HFRI Macro Total Index:
MTD 2.73% / QTD 5.60% / YTD 12.19%

Trading strategies produced mixed performance in September. Developed market macro strategies were challenged by the rise in bond yields.

Gains from front-end exposure in Europe provided a partial offset in an environment characterized by significant dispersion.

Equity and FX themes were also mixed, with only a modest impact on manager results.

Commodity strategies generally produced positive results, with gains across rare earth metals, natural gas and crude oil themes, while positions in gold likely detracted.

Source: UGA - Hedge Funds, HFR. For illustrative purpose only. As of September 30, 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-10/26 M-007365

Related capability

Hedge Funds from Unified Global Alternatives

With a wide range of investment programs and robust risk management, we strategically allocate across the dynamic hedge fund universe to help meet your investment goals.

Endnotes

Latest insights

We’re here to help

Contact us

For general inquiries with UBS Asset Management, fill in a form with your details and we’ll be back in touch.

Our leadership team

Our global leadership team is deep, diverse, and dedicated to our ethos of delivering investment excellence.

Find your local UBS office

As your expert global partner, we're closer than you think. Discover UBS's locations in your region.