UBP and Brigade formed their partnership in response to a clear, bottom‑up demand from UBP’s investment teams for a new, dedicated long/short credit strategy.
As UBP increased its conviction in the alternative credit space, it identified a gap in its range of investment solutions for an approach that could dynamically capture alpha across the credit spectrum while managing downside risk through short exposures and active hedging. Brigade’s extensive expertise in corporate credit and structured credit made it a natural fit to design and manage this capability.
The outcome of this partnership is an innovative alternative UCITS investment strategy that launched in 2022; it has attracted strong interest from investors.
Founded in 2006, Brigade Capital Management, LP is a global asset management firm investing across the broader credit universe. Brigade currently manages a diverse capital base for institutional investors.
Brigade believes that credit is a cyclical asset class, with spreads widening and tightening based on market fundamentals. As markets move through the credit cycle, Brigade rotates its portfolios in order to take optimal advantage of the changing opportunity set. The idea of credit rotation allows Brigade to be dynamic and allocate to the best risk/reward opportunities within the capital structure.
The manager implements a long/short credit strategy that combines fundamental credit selection and structured credit. The strategy seeks long-term capital growth through all market environments with a strong focus on capital preservation.
Brigade has substantial experience in taking long and short positions in the corporate credit and structured credit markets. It employs a quantitative and qualitative investment process that seeks to identify undervalued corporate credit investments, as well as those most likely to default. As part of this process, Brigade reviews the risk/reward profile of an investment proposal and analyses the capital structure of the issuer.
Brigade’s process for analysing opportunities in the synthetic structured credit market starts with developing an opinion on the expected loss of the portfolio in combination with an assessment of the relative value of the liabilities.
The objective of the strategy launched in partnership with UBP is to benefit from the attractive carry available in credit markets, while mitigating downside thanks to dynamic hedging. This allows investors to experience lower volatility and drawdowns than the broader market, as well as limited market sensitivity, especially on the downside.
If we analyse the strategy’s numbers over the last four years through the lens of a market exposure of just over 60%, we observe that it has outperformed its market-adjusted exposure, as it has delivered over 80% of the high-yield market return (Figure 2). However, it has not done so at the expense of higher risk, with the strategy’s volatility being close to its market-adjusted exposure – 65% of the market’s volatility; rather, it has done so by delivering alpha. The other observation that we can see in Figure 1 is that the strategy has been rather cautious since the end of 2024, with exposure levels below average during most of this time. This lower exposure was driven by tight spreads and overall asymmetric downside risks that the investment team was concerned about.
Figures 1 & 2. Strategy HY equivalent exposure & Alpha versus the HY cash bond market
As mentioned above, despite the average high-yield equivalent exposure, the strategy has shown limited sensitivity to credit markets, and even less so to interest rates, in particular on the downside. The investment team has been rather cautious over the last 12–18 months; however, they have been able to take advantage of the recent bouts of market volatility by increasing the exposure and carry, which is now 100 bps above that of the high-yield cash bond market. This carry is net of portfolio hedging and macro convexity positions, offering a very attractive risk/reward profile. This allows investors to access an attractive carry compared with traditional credit, despite a lower market exposure, and with a fraction of the beta, lower volatility and limited sensitivity to interest rates.
The current environment remains favourable, as dispersion in credit remains elevated. The strategy should act as a good complement to traditional fixed income and should bring diversification to clients’ portfolios.
The opinions expressed herein are correct as at 10 June 2026 and are subject to change without notice. This information should not be relied upon by the reader as research or investment advice regarding any particular fund, strategy or security. Past performance is not a guide to current or future results. Any forecast, projection or target, where provided, is indicative only and is not guaranteed in any way.
The views and opinions expressed by fund managers (internal or external) may differ from the house view. They are shared for informational purposes and do not constitute investment advice or a recommendation.
