UBS Plans Long-Short Fund With ESG Strategy

UBS O’Connor, the bank’s multistrategy hedge fund business, will make short bets based on environmental factors in particular, according to its CIO.

Stefan Wermuth/Bloomberg

Stefan Wermuth/Bloomberg

UBS Group’s multistrategy hedge fund business is planning to launch a long-short fund to make bets tied to environmental, social and governance criteria, according to the unit’s chief investment officer.

Kevin Russell, CIO of UBS O’Connor, said Monday on the sidelines of the bank’s asset management outlook event in New York that his group is hiring an investment team for the long-short fund. During the lunch, Russell spoke generally about O’Connor’s ESG strategy, saying the hedge fund unit is now focused on bets based on environmental factors.

O’Connor’s ESG team will consider areas such as the carbon footprint of companies and regulatory reform when creating short positions, according to Russell. He said the group will use investment insights beyond what’s widely available from third-party providers of ESG data.

In June, UBS Asset Management released a survey that found large investors believe ignoring ESG criteria when allocating capital would imperil their portfolios. The recent bankruptcy of PG&E Corp., which has been implicated in California’s devastating wildfires, underscores such concerns.

[II Deep Dive: Investors See ‘Material Risk’ in Ignoring ESG]

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During the event Monday, Barry Gill, UBS Asset Management’s head of investments, said that the Europe is far ahead of the U.S. when it comes to ESG investing. While the amount of ESG data is growing, he said the industry still has a long way to go.

Quantitative investment firm Acadian Asset Management told Institutional Investor in May that evaluating companies from an ESG perspective is more challenging than simply identifying which companies have high or low scores in the category. Acadian was then exploring the use of machine learning in ESG to make predictions about companies’ performance.

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