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UBS explores bond futures

UBS Global Asset Management

UBS Absolute Return Bond Fund

Type: Oeic

Aim: Growth by investing globally infixed income assets including bond futures

Minimum investment: Lump sum 1,000, monthly 50

Investment split: At least 60% in investment-grade bonds, up to 40% in high yield and emerging market bonds

Isa link: Yes

Pep transfers: Yes

Charges: Initial 1%, annual 1%

Commission: Initial 1%, renewal 0.25%

Tel: 0800 587 2111

The UBS absolute return bond fund uses the Ucits III directive to produce absolute returns in all market conditions by investing in bond futures as well as a conventional bond portfolio.

MM Financial Management managing director Miles Moseley thinks this fund is too complicated in parts to explain to clients. He says: “I believe that the time for bond funds has passed – they tend to do well during times of poor equity performance. But the markets seem to be recovering, which means bond funds could lose value.”

However, he does not see the use of bond futures as a solution to the problem. He explains: “The use of bond futures may be clever but how many clients are going to understand it? We would never recommend our clients to invest in something they didn’t understand.”

Moseley is also unhappy about the targeted return. He says: “The target of 2.15% over base rate isn’t that exciting when you consider the possible downside if UBS gets the futures part wrong.”

Moseley finds the literature clear and attractive. He feels the charges are okay, but regards the commission as an insult.

When looking at past performance Moseley finds very little data available on UBS funds. He says: “The data that is available shows consistently below average performance but that is only over the last couple of years. We would not recommend any fund without a S&P four star or five star rating, showing decent performance over at least three years. The literature makes reference to the strategy being available since May 2004 in two Luxemburg- based funds big deal.”


Suitability to market Average
Investment strategy Average
Charges: Average
Adviser remuneration Poor

Overall 3/10


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