UBS has launched a new fund that will leverage the equity research that UBS Global Asset Management already does, and endeavor to capture alpha from both under-valued and over-valued U.S. equity securities. It is a 130/30 long-short equity strategy in which the portfolio’s managers will sell-short overvalued securities worth 30% of the portfolio’s nominal value, and take the proceeds from the short sales and buy 100% plus another 30% of the portfolio’s value in equities it deems undervalued.
“Determining fair value,” says Thomas Digenan, “is what we’ve been doing for 25 years: our primary job is to value securities.” Once they’ve determined the fair value, they compare that to its current price, “and then execute on the differential.” There are opportunities–”mis-pricings,” that can provide and additional opportunity for alpha. Based in Chicago, Digenan is North American equity strategist, and managing director at UBS Global Asset Management, and part of the portfolio management team for the UBS U.S. Equity Alpha Fund (BEAAX), a new retail offering. The fund has about $90 million in assets so far, but is based an institutional sibling with about $800 million in assets.