QIS house of the year: UBS

A client-first approach has been the defining strength of UBS this past year. The bank has used the breadth of its quantitative investment strategies (QIS) franchise, derivatives capabilities, wealth-management flows and insurance expertise to build highly customised solutions across the Asia-Pacific region.

Rather than start with a strategy and find a home for it, UBS first looks at the client’s problem – portfolio concentration, tail risk, regulatory capital constraint or the need to access a particular market – and builds a bespoke solution around it.

It’s an approach that has resonated strongly with clients, translating into a growing pipeline of bespoke QIS mandates across the region.

“UBS’s credit derivative solution is the best in the market,” says a senior manager from a Taiwanese bank. “We asked some other banks to provide us with some ideas … but the one from UBS was the only one that worked. I am really happy to work with UBS because they always try to find creative solutions for my clients.”

A client-centric strategy

Romain Barba, head of structuring for Apac, says a critical part of the bank’s strategy is not to have a pre-conceived notion of what a successful product strategy looks like.

“We do not rely on any single asset class for QIS,” he says. “Instead, we offer a broad and diversified range of strategies across asset classes, with the capability to combine and tailor them to specific client objectives. This allows us to deliver the solution that best meets a client’s needs, rather than limiting them to a narrow set of pre-packaged offerings.”

This approach has helped UBS build a QIS franchise that is highly differentiated by client and by market. Rather than relying on a one-size-fits-all product set, the bank combines its cross-asset expertise to develop solutions tailored to the specific requirements of each client.

Equally important is the post-trade support that underpins the bank’s QIS solutions. The bank’s involvement does not end when a transaction is executed. Teams continue to monitor positions, assess changes in market, macroeconomic and geopolitical conditions, and provide clients with ongoing risk reporting and analysis.

“A key differentiator in our QIS business is our long-term partnerships,” says Filip Siekierczak, head of institutional FX sales Singapore and Hong Kong for Global Markets. “Our solutions are less about getting a particular trade out the door. They are much more about working closely with the client and living with the position throughout the whole lifecycle.”

The approach has been tested, particularly over the past couple of years, as clients have had to navigate a succession of sharp and often unexpected market shocks.

The US tariff shock, for example, triggered significant volatility across equities, rates and currencies, while the war in the Middle East added another layer of geopolitical uncertainty.

For UBS, these episodes have underscored the value of staying closely engaged with clients beyond execution. By monitoring how their exposures respond to changing market conditions, the bank can provide timely analysis and refine solutions as risks evolve.

Two particular examples illustrate the value UBS’s QIS solutions continue to bring to clients – chosen to show the breadth of the bank’s product offering and the wildly different client scenarios UBS has to manage.

The first pertains to a hedge fund client that was heavily invested in stocks.

The strong performance of equity markets over the past year – driven in large part by robust corporate earnings and continued enthusiasm around artificial intelligence and technology stocks – had increased both the value and concentration of the fund’s equity portfolio. The client therefore wanted to add downside protection without materially disrupting the characteristics of its existing book.

UBS responded by designing a bespoke solution tailored to the fund’s specific equity exposures. However, rather than just introduce a simple volatility overlay – which might have been the most obvious approach – the bank chose to structure this trade as a dispersion strategy, giving the client the long-tail protection they were looking for. UBS used its expertise to manage the carry of the trade and mitigate any associated decay.

“The key here was understanding the client’s portfolio and what they were trying to achieve, optimising the implementation, and then leveraging the bank’s natural strengths and the flows we see from private wealth,” says Siekierczak.

The second example is a bespoke fixed income overlay that was developed for a sovereign wealth fund. It was designed to sit on top of the client’s existing equity portfolio, providing an additional source of returns while offering a degree of protection during periods of heightened market volatility.

One notable aspect of this solution wasn’t its complexity, but that it took such a long time to put together. Siekierczak says UBS was working on the solution for more than a year and a half – running stress tests and assessing all possible permutations. As part of this project, UBS also developed a bespoke reporting system that allowed the client to monitor the live risks of the trade in the specific format that they wanted.

“This is a further demonstration of our capabilities and how we can bring different parts of the bank together to deliver the right solution for the client,” says Siekierczak.

Aussie rules

This client-first approach is particularly evident in Australia, where over the decade UBS has built up an experienced structuring team and long-standing partnerships with key clients.

There are a few common themes that have dominated QIS portfolios in Australia, including the growing concentration of portfolios in AI-related equities, the rise of private credit and broader concerns around liquidity.

While these key drivers are present across the market, solutions can be quite different depending on the type of client. This is where UBS’s bespoke positioning kicks in.

For example, the S&P 500 remains the most common benchmark for international equities among both superannuation funds and insurers. However, both have slightly different perspectives on risks.

Super funds are primarily asking how to manage benchmark-relative and tail risks without sacrificing participation in market upside, while insurers need to think about maintaining adequate capital ratios.

The growing concentration of the S&P 500 has created a more complex risk management challenge for UBS’s clients, with 40% of the index concentrated in its 10 largest companies and around 20% exposed to semiconductor risk. Traditionally, investors have turned to options-based hedges to manage these risks, but the cost of carrying such protection can be significant.

“The transactions have been primarily concentrated in two key areas,” says Stuart Trueman, head of equity derivatives distribution for Australia. “For superannuation funds, our focus has been on helping clients manage the risks associated with being either overweight or underweight relative to their benchmark allocations. For insurers, the emphasis has been on mitigating the risks of maintaining exposure to growth assets while ensuring that the solution delivers the desired regulatory capital relief.”

These challenges have been compounded by deepening concerns around liquidity, forcing UBS to develop strategies that can protect the accumulation aspect of portfolios while still allowing clients to grow their investments.

“Delivering these outcomes requires a highly customised QIS approach,” says Trueman. “Over the past 12 months, every mandate has been designed specifically for the client reflecting the unique risk, capital and investment return considerations of each institution.”

Japan plan

In Japan, a changing market environment required a different QIS proposition – and UBS was in a good position to deliver.

Over the past two years, as the Bank of Japan has normalised monetary policy, yields on Japanese Government Bonds have shot up – making the home market attractive once again for Japanese investors. This has helped bolster the market for QIS, with regional banks no longer looking to overseas investments for yield and seeing systematic strategies in the domestic market as an attractive alternative to building sophisticated capabilities in-house.

One area that remains particularly active is the Japanese yen swaptions market, with many regional banks keen to express the directional view that rates will continue to inch higher. This has made strategies that involve the selling of short-dated receiver options popular.

Another strategy that has been gaining traction of late is the ‘target buying’ strategy, in which Japanese investors use put options to gain exposure to the Nikkei at a lower entry than the prevailing market price.

“As Japanese banks have moved away from pure carry trades, they have shifted towards a range of higher-yielding products, systematic QIS solutions and more targeted option strategies aligned with their long-term market views,” says Suicheng Wang, head of equity derivatives, QIS and insurance solutions structuring in Japan. “Our team combines deep local coverage and the broad resources of a global institution to be able to deliver the solutions that clients want.”

Diverse distribution

The bank’s broad distribution network gives its QIS team access to a diverse range of clients across institutional, wealth management and insurance channels.

This creates a two-way flow of information. Client conversations help UBS identify emerging demand, while the bank’s understanding of different investor bases allows it to adapt existing ideas for new markets and applications.

This makes for a powerful QIS house in the region, reinforcing UBS’s bespoke approach. Rather than developing a product, then relying on sales coverage to find buyers, the bank can use its distribution network to identify specific problems and feed those requirements back into the structuring and QIS teams.

“Our insurance and AMC businesses show how we can take QIS beyond traditional institutional applications,” says Lin Qian, head of equity derivatives and QIS structuring for Apac. “By combining investment innovation with flexible wrappers and strong local distribution, we are helping insurers, family offices and financial institutions across Asia access solutions tailored to their specific growth, diversification and capital-efficiency needs.”