Unified Global Alternatives – Hedge Fund Bulletin

Overall market commentary

Risk assets produced broadly positive performance in August. The focus of the month was on comments made by US Federal Reserve Bank Chairman Powell at Jackson Hole, which supported interest rate cuts over the coming quarters. Despite some uncertainty regarding potential personnel changes at the Federal Reserve, the macro backdrop remained favorable with economic growth being a primary goal of the US administration. The Dow Jones Industrials, S&P500 and the NASDAQ posted positive performance in August, with gains of 3.20%, 1.91% and 1.58%, respectively. The European indices generated mostly positive performance with the MSCI Europe and FTSE producing gains of 0.96% and 0.31%, respectively. The DAX generated negative returns of -0.68% during August. Asian developed markets produced positive results with the Nikkei 225 generating a gain of 4.01%, in line with the broader risk rally despite a stronger Japanese Yen. Emerging market indices produced mixed performance in August. Chinese and Brazilian markets rallied 7.97% and 6.28%, respectively, while Indian markets retreated -1.69%. US interest rate markets rallied on the back of the US Federal Reserve’s dovish comments. The two-year US Treasury yield fell to 3.62% from 3.96% and the ten-year US Treasury yield decreased to 4.23% from 4.38%. Given the rally in Treasury markets, the Barclays US Corporate Investment Grade Index rallied 1.01%, while the Barclays US Corporate High Yield Index gained 1.25%. Commodity prices were again mixed in August with gold rising 5% on the back of USD weakness and Fed independence concerns, while oil fell 6.1%. In currency markets, the Euro rose 2.40% from 1.1416 to 1.1690, while the US dollar fell 2.89% against the Japanese Yen from 150.48 to 146.83.

Source returns: UBS World Market Report. As of August 31, 2025. Historical performance indications and financial market scenarios are not reliable indicators of future performance.

US Equity Hedged strategies generated mixed returns in August. The overall environment resulted in a value-driven month from a factor standpoint, with headwinds stemming from growth, size, momentum and quality. Most sectors were positive for the month, as the healthcare sector drove performance. Small cap biotechnology stocks experienced a notable rally, driven in large part by the rate move at month-end. Conversely, technology and utilities sectors registered slight declines given the capex concerns. Manager performance was mixed and primarily influenced by stock picking during the month. Overall, there was material variation in performance among managers. Biotechnology and financials-focused managers produced positive performance during the month, with the beta factor and strong stock selection contributing to results. August also demonstrated a distinct broadening of the market, especially late in the month as Powell’s more dovish stance at Jackson Hole catalyzed a rally in small cap and cyclical stocks. This occurred alongside a resurfacing of concerns over the sustainability of capex, which pressured some of the AI beneficiaries such as providers of power to data centers and semiconductor companies.

European Equity Hedged strategies generally produced negative performance in August. Results were driven primarily by alpha losses that led to the underperformance relative to both equity benchmarks, as well as other regional peers. Europe-focused managers’ gross leverage declined, and net leverage also decreased. European managers’ gross decreased by 8.7% to 172%, while nets decreased by 3.1% to 56.6%.

Asian Equity Hedged strategies generally produced positive performance in August. Performance drivers included positions in China, US and Japan. The Japanese market was positive despite the Yen strengthening as the market moved higher on the back of increased US rate cut expectation before retreating slightly on overheating concerns in the second half of the month. The Chinese market was also largely positive, particularly the domestic A-shares market, which experienced a strong rally across indices and a sharp pick up in trading volume. The new anti-involution policy remained a key focus throughout the month.

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Fixed income relative value strategies generally produced positive performance in August. Gains were achieved across a wide range of sub-strategies with no material detractors. US basis and bond RV continued to perform positively, as well as European RV themes such as long-end steepeners, tenor basis trades around the pension fund reform theme, and some European focused trades in France and Italy. US inflation trading and Japan macro rates themes also contributed positively during the month.

Capital structure / volatility arbitrage strategies generally produced positive performance in August. Convertible arbitrage themes benefitted from a strong new issue month, a significant percentage of which were issued as a source of financing corporate action related events. The new issuance volume over the last few months resulted in some secondary market cheapening. The recent interest rate move was a minor contributor (excluding hedges), while credit spread widening represented a modest detractor. Distressed convertible bonds continued to detract from overall returns. Capital arbitrage was generally positive across the board, including some short biased trades. Volatility strategies benefited from index-related RV trades but were negatively impacted by some single name volatility RV strategies. The global convertible bond primary market net expanded by USD 2bn as USD 12bn of new issuance exceeded USD 10bn worth of redemptions. US represented approximately 80% of the new issuance for the month with some particularly large new issues coming from names such as Coinbase and Terawulf. August performance for equity capital market managers was positive, driven by IPO’s but there were also a number of profitable block and follow-on trades that were accretive.

The average non-annualized spread to deal price widened slightly this month however, ending the month at 3.7% compared with 3.3% at the previous month-end. In August, 16 transactions over USD 1bn in size were announced, accounting for USD 55bn in aggregate transaction value including Thoma Bravo’s USD 12bn LBO of Dayforce (DAY), Black Hill’s USD 7bn utility merger with NWE, and Nexstar’s USD 6bn acquisition of TEGNA.

Agency MBS strategies generally produced positive performance in August. Gains were generally driven by interest income. The balance of the portfolio impacts was relatively benign with gains from interest rate factors and flat to marginally negative contribution from changes in derivative spreads. Quantitative equity strategies generally produced positive performance in August. From a factor perspective, crowdedness (both short and long), country tilt (domestic China and Japan), asset selection and size were among the largest alpha contributors. Partially offsetting those gains were losses from medium-term momentum, volatility and concentration approaches.

HFRI Reltive Value Total Index:

Corporate credit strategies generally produced positive performance in August. Corporate long / short sub-strategy performed positively in August. The vast majority of managers were positive during the month. The US allocations outperformed relative to the European segment of the portfolio. The US managers benefited from higher dispersion and primarily profited from long investments. In Europe, the long portfolios for certain managers underperformed due to idiosyncratic losses. The corporate long-biased sub-strategy also generated a positive return in August. There was a high degree of dispersion on the long side of the portfolio during the month as idiosyncratic developments were heightened. Those funds that had equity exposure to a specific telecommunications company outperformed relative to peers.

Asset-backed strategies (ABS) generally produced a positive performance in August. Long investments were the key driver of performance as interest income was the primary driver of returns. The impact of spread tightening was not a material factor in performance. The top contributors to performance were Other Income, RMBS, CMBS and SRT. There were small losses from select investments in CLO equity and certain CRE loans.

Reinsurance / ILS strategies generally produced positive performance in August. Positive returns for both managers were mainly a function of carry; accrued coupon income for the cat bond manager and premium accrual for the collateralized reinsurance manager. However, there was a material augmentation in performance for the cat bond manager as spreads tightened during the month, typical for mid-hurricane season. There were no loss producing events during the month as there was only one Atlantic hurricane (Erin) and it remained well offshore of the east coast of the US.

HFRI ED: Credit Arbitrage Index:

Discretionary trading strategies generally produced positive performance in August. Gains were generally produced on the back of positions in US and EU receivers and steepeners. Japanese government bond payers were also accretive, although curve flatteners detracted in some cases. Oher contributors included swap spread positions and shorts in Europe, particularly in France. Conversely, UK receivers detracted across the board. FX attribution was generally more muted, as some managers experienced gains on short USD bias vs. EUR as well as Latam currency exposure. Equity themes produced mixed performance with some gains from Technology / AI and energy themes, which were partially offset by mixed performance in financials, industrials and losses in small cap shorts. Performance from credit positions were limited, while commodity exposures were positive via gains in long copper and gold, as well as short crude oil positions. Emerging market strategies also produced positive performance in August. The idiosyncratic carry trades in EGP, NGN, TRY and Zambia drove gains with additional contributions from EM rates on the received side, and in some cases, a paid bias in CZK. Developed market themes were also positive with gains in equities and credit positions. Other contributing themes with developed markets included gains from a short USD bias and long positions in equities. Exposure to developed market interest rates was more mixed, with overall weakness in UK receivers and variable performance in EUR and US rates.

Systematic trading strategies generally produced positive performance in August. Across more traditional trend models, gains were mostly driven by long exposures in equities, precious metals and short USD. Programs with more diversified exposures were also profitable, as certain fundamental and higher-turnover signals contributed, although underperforming their classic trend following counterparts. Alternative trend followers generated gains as well. Performance was driven by their ability to capture downtrends in natural gas, coal and power, while also profiting from long exposures to MXN and ZAR rates. Long positions in digital assets, emerging market equity indices and credit indices were also additive. Managers with more diversified alpha models generally underperformed during August.

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