UBS Global Asset Management has launched three alternative beta equity funds benchmarked to the FTSE RAFI Developed 1000 Index, the MSCI World Minimum Volatility GBP Optimised Index and the MSCI World Quality Index. According to UBS Global Asset Management, value-based indices such as the RAFI index tend to outperform in a strong macro environment, while quality indices are more defensive.
The funds aim to give institutional investors access to alternative beta indices via a pooled fund. UBS head of UK & Ireland, Ian Barnes, said: “While market cap-weighted indices have many advantages, including broad diversification and high liquidity, they do have a systematic flaw. This flaw may mean investors can end up holding more stock that is overvalued and less that is undervalued – the opposite of what many would see as most pragmatic.” Barnes added that investors are increasingly using alternative beta approaches and combining alternative indices with conventional passive index funds.
UBS Global Asset Management said it has run alternative beta strategies as segregated accounts since early 2010 and has total passive assets of £117 billion.