UBS launches portfolio to invest in women-led hedge funds

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UBS has launched a portfolio that invests solely in hedge funds led by women in an effort to improve diversity and spot hidden talent in the traditionally male-dominated sector.

The Swiss bank’s asset management arm launched the Carmen portfolio in recent weeks after trials, said people familiar with the matter. It will aim to pick 10-15 funds globally where a woman has sole or joint discretion over the investment of the assets.

The launch comes at a time of growing investor interest in women- and minority-run funds, with US pension plans and other large allocators increasingly looking to make investments based on environmental, social and governance criteria.

The late Yale endowment fund chief investment officer David Swensen last year wrote to external investment managers saying the fund was looking for “a level of diversity in investment management firms that reflects the diversity in the world in which we live”.

Female representation in hedge funds, at 18.6 per cent, is the second-lowest across seven alternative asset classes, according to data group Preqin, and fell marginally over the past year. Women represent 10.9 per cent of senior employees at hedge funds, a slight increase on the previous year.

UBS declined to comment specifically on the launch of the Carmen portfolio but Claire Tucker, senior investment officer at UBS’s hedge funds unit, said women had been “under-represented, particularly on the investment side, despite a lack of evidence justifying that by skill or performance differences”.

Hedge funds run by women were able to limit losses better than those run by men during last spring’s market plunge, while also profiting from the subsequent market rebound.

However, this year they have lagged the wider industry, which has profited from strong gains in equity markets and other risky assets. The HFR Women Access index has gained 6.5 per cent in the first half, while the HFRI 500 Fund Weighted Composite is up 9.2 per cent.

Among those doing well is Leda Braga’s Systematica, whose $4.4bn Alternative Markets fund is up about 14 per cent, according to numbers sent to investors. Lan Wang Simond’s Mandarin Offshore fund is up 3.2 per cent.

“It has been a particularly strong environment for hedge funds in general, with [the first half of the year] reported to be the strongest in history, so it’s not surprising to see the women-run funds which have historically exhibited more robustness in down markets lag slightly”, said Russell Barlow, global head of alternative investment strategies at Aberdeen Standard Investments.

UBS’s launch comes after Aberdeen Standard Investments last year announced it would debut a fund that tracks the performance of an index of women-run hedge funds constructed by data group HFR.

The UBS Carmen portfolio will be actively managed, using quantitative and other analysis to select funds to invest in. UBS has built a database of more than 340 women who are sole or joint managers or, in the case of computer-driven funds, have significant influence over the research behind fund algorithms.

“Women-led funds struggle to attract as much capital as male-led peers,” said UBS’s Tucker, noting that “there has been an increase in client interest in diversity”.

Hedge fund strategies such as macro and fixed income relative value tend to have fewer female portfolio managers, according to UBS.

Tucker said the firm had been “asking more difficult questions [of hedge funds], such as: ‘Why are there no women on the investment team?’” It also plans to help women who run part of a hedge fund but are not the main fund manager launch their own portfolios by providing initial capital.

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