Dimitrios Goumenos discusses the UBS Global Equity Long Short Fund
Why would you consider this fund to be a "best idea" and how could it work in an investor's portfolio?
The current market environment for global equities is characterized by a significantly increased uncertainty among investors, as well as a wide range of possible outcomes both macroeconomically and geopolitically. For this reason, we consider the current time to be ideal for investors to expand existing portfolio positions with a solution such as GELS, which offers return streams as uncorrelated as possible, focuses on capital preservation to limit downside risks, and features daily liquidity with low key person risk.
Especially during periods where the volatility index (VIX) increased to >25, GELS historically proved its advantageous diversification effect. This was primarily driven by our diversified sleeveholder structure, currently comprising seven uncorrelated alpha streams, resulting in an average correlation of 15% (vs. 71% for the MSCI World).
Finally, based on our disciplined, long-term intrinsic value investment approach, we have been able to establish a strong track record since the launch of GELS in 2012 with only one down year (2018). Particularly noteworthy are periods such as 2022, Q3 2023, or recently Q1 2025, in which global equity markets yielded negative returns, while GELS provided positive returns and thus offered clear diversification benefits for its investors.
Can you give an overview of the team running the fund and investment process?
The portfolio is managed by our co-PM team Scott Wilkin and Dimitrios Goumenos out of London. The Fund is leveraging off our Global Equity team's common global research platform, with local investment teams in key regions like London, Chicago and across Asia. We are convinced that our team structure is advantageous for clients in that it is a truly global set-up with analysts based regionally (boots on the ground research).
Teamwork and collaboration are an essential part of the process, and this team-based approach integrates a wide range of experience and skills from a diverse team of analysts and PMs. Our analysts have extensive industry-specific backgrounds and are trained to evaluate future cash flows.
At the heart of our process is a belief that every stock has an intrinsic value which is based on the accumulation of long-term future cash flows, discounted back to the present day. We believe that by estimating the long-term worth, or intrinsic value, of a company and comparing against the current market price that we can identify under and over-valued shares. This presents opportunities for us to exploit mispriced securities and hence an ability to add value.
What do you see as the big opportunities and risks for your strategy?
Driven by its as uncorrelated as possible nature, GELS offers opportunities, regardless of the prevailing market environment. Our disciplined, long-term intrinsic value approach focuses on exploiting valuation discrepancies on both the long and short side, independent of the underlying market period. Through active management of our capital allocation across currently seven uncorrelated sleeveholders, our co-PMs actively steer the exposure to those sleeves that offer highest opportunities in the current market environment. At the same time, we maintain a strong focus on daily liquidity, low key person risk, and capital preservation, which offers investors' diversification and thus should enhance the overall outcome.
Short-term risks exist during periods where investors ignore fundamentals resulting in extreme valuation discrepancies in the market. Such a behaviour causes our valuation spreads to expand violently. This happened during the dot com bubble, GFC and early in the COVID pandemic. We have learned over time that our proprietary valuation spreads display reliable mean reversion behaviour, so significant spread expansion would be a signal to us that the alpha opportunity is improving on a forward-looking basis.
Can you identify a couple of key investment opportunities you are playing at the moment in the portfolio? This could be at a stock, sector or thematic level
On a (sub-)sector level we are currently net long European banks. We see European banks priced at recessionary multiples, not reflecting a new structural interest rate environment. In our view, the market does not appreciate significantly improved market structures in Ireland and Spain, compared to history, nor the persistency of capital returns. Further, European regulators have embedded deep conservatism into the banking system, with severe stress-testing as well as liquidity and interest rate risk management.
Within the Health Care sector one of our highest conviction positions on the long side is United Health Group. The company is a managed care organization with leading positions across the Commercial, Medicare and Medicaid markets. In our view, United Health is playing a crucial role in driving the transition toward value-based care arrangements which is essential to bending the cost curve. We think that investors continue to underappreciate the magnitude of this transition, and we believe that by the later part of the decade, growth in Optum Care's provider businesses will shift United Health's business model to that of a healthcare provider with an insurance subsidiary, providing a significant competitive advantage versus peers.
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