Structurers at UBS in London are looking to launch a fund of hedge funds product with an innovative inflation-linked payoff in the next three months. Several investment products offering private banking clients the best of inflation or equity indices have been brought to market in the last two or three months, but the UBS structure combining fund of funds and inflation is thought to be the first of its kind. Rising commodity prices have caused fears of inflation, making these products interesting for private bank clients and high-net-worth individuals, said structurers.
UBS has priced both a best of structure pitching the fund of funds against inflation and an out-performance structure, which pays investors the fund of funds returns and uses an out-performance option to add either an inflation or an interest rate component. Camilla Du Boulay, marketer in the risk management products group, said marrying inflation with a fund of funds underlying rather than equity will give the product added appeal to private banking clients.
