Strategy Outlook

UBS Asset Management shifts its hedge fund outlook toward a stagflationary scenario triggered by Middle East conflict and supply chain disruptions. The firm is increasing focus on relative value strategies to mitigate heightened correlation instability between asset classes.

Key Takeaways

• 1.The global economy is shifting from a 'goldilocks' state toward stagflation due to the Middle East conflict and Strait of Hormuz closure.
• 2.Q1 2026 performance was generally positive, outperforming broader indices but trailing hedge fund benchmarks, led by gains in commodities and credit.
• 3.UBS is marginally reducing Equity Hedged exposure in favor of more defensive Relative Value strategies due to correlation instability.

Table of Contents

• Q1 2026 Performance review
• Q2 2026 Outlook
• CIO model portfolio and sub-strategy outlook
• Strategies
• Endnotes
• Risk considerations
• Disclaimer

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