by Detlef Glow.
Lipper’s Detlef Glow, head of EMEA research, reviews a one-on-one meeting with Gregor Hirt, Managing Director, Chief Investment Officer (CIO), Europe and Switzerland Global Investment Solutions at UBS Global Asset Management in Zürich, and fund manager, UBS Dynamic Alpha Fund, on July 8, 2014.
Gregor Hirt joined UBS Global Asset Management in January 2014. Prior to that Gregor was lead portfolio manager for multi-asset funds at Schroders, where he worked with Andreas J. Köster, Managing Director and Head of Asset Allocation & Currency at UBS AG, who leads the UBS multi-asset team. Although Gregor Hirt only joined UBS recently, he has been acquainted with its multi-asset management approach for a long time as he implemented and managed funds with a similar approach together with Andreas J. Köster at his former employer, Schroders. For that reason, he sees his arrival at UBS as a complementation to the existing multi-asset team rather than a restructuring measure. Thus, he does not intend to change the management process of the UBS multi-asset products. Having said this, Gregor admitted he does see some potential to optimize single steps within the existing management process.
As a team leader, Gregor Hirt sees one of his main tasks in the coordination of the multi-asset team which comprises around a hundred employees with different areas of expertise based in six cities on four continents. Gregor strongly believes the team-based management approach implemented at UBS has a competitive advantage, since this approach enables portfolio managers to use different sources – such as quantitative and qualitative research – to identify investment opportunities.
He also sees the broad variety of specialists who deliver individual research accompanied by a transparent decision-making process monitored within the investment committee – as key to the success of the UBS multi-asset team.
With regard to UBS Dynamic Alpha Fund, Gregor explained that the fund is an unconstrained multi-asset fund, investing in bonds, equities, commodities, and currencies. The fund manager has the flexibility to go short to participate from negative expectations on single securities or markets. In addition, the fund manager can use options strategies to minimize the volatility of the fund. Gregor Hirt suspects this active-management approach delivers a return of 3.5% above the money market return. He also said he is trying to keep the maximum monthly loss of the fund (value at risk–VaR) below 5%.
Figure 1 Performance, UBS Dynamic Alpha Fund Versus Peer Group Average, August 31, 2011–August 31, 2014 (in Euros)
Source: Lipper, a Thomson Reuters company
To achieve this target the management approach of UBS Dynamic Alpha Fund is based on three different performance drivers: (1) market performance, which can be played long and short or by pair trades to participate from valuation differences; (2) currencies, which are regarded as separate performance drivers and can also be played long and short; (3) and, in addition to these more beta-related performance sources, securities selection is used to generate alpha as performance enhancement compared to the underlying markets. It is noteworthy that Gregor Hirt annotated that UBS Dynamic Alpha Fund,because of its diversified portfolio, will not show the same performance pattern as an equity investment during bull markets.
He also mentioned that UBS Dynamic Alpha Fund, despite its broad diversified portfolio, is not a core investment and should be used in conjunction with other mutual funds to diversify the market and manager risk. Additionally, Gregor explains that the fund, because of its active management approach, will need some time to generate the expected average return profile and should therefore be bought only by investors who have a mid- to long-term investment horizon. He closed this part of his presentation by once again focusing on the target return of money market plus 3.5%, mentioning that investors should not extrapolate higher returns in single years to make the fund fit their personal return targets; in other words, investors who have a return target above money market plus 3.5% should not buy the fund.
The author acknowledges that he has no holdings in the fund mentioned in the article above.