Global dispersion set to benefit UBS Dynamic Alpha Strategy fund

chess pieces 410The UBS Dynamic Alpha Strategy (DAS) fund has positioned itself to take advantage of opportunities that may arise from an expected increase in volatility later in the year.

The repositioning includes a bet that the price gap between stocks listed in mainland China and Hong Kong will narrow.

Following the strong rally across both equities and fixed income to late April, the fund has recently reduced overall portfolio duration within the strategy's bond holdings and reduced the equity exposure from 35% to 20%.

The fund, managed by Andreas Koester, head of asset allocation and currency for the global investment solutions team within UBS Global Asset Management, believes equity markets still provide good opportunities for investors over the medium term. But he points out that DAS has a degree of investment flexibility, which he says is rare and which means the strategy does not rely solely on directional risk to generate returns.

“Over the past twelve months a rally in China’s A shares has seen the price double and they now trade at a significant premium to their Hong Kong-listed counterparts. We believe this valuation gap will close regardless of future market direction and as such we are long H shares versus A shares,” says Koester.

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