If you are reading this article, you probably invested in the UBS Yield Enhanced Strategy (“UBS-YES”) and were surprised to learn the UBS-YES program you invested in was not exactly a “market neutral” investment strategy during the recent COVID 19 market crash. Despite your UBS stockbroker’s representations about the UBS-YES managers ability to “manage risk” and “minimize losses” through its “iron condor” option strategy you still realized substantial losses. You are not alone because that is just what many other UBS-YES investors have told us about the pitch made to them to invest in the UBS-YES program and their recent experience.
The sad fact is UBS and its financial advisors knew or should have known from the UBS-YES program’s recent history this could happen and still failed to adequately warn and protect investors this year. UBS-YES program investors had the same bad experience in December 2018 and the first few months of 2019 when the UBS-YES managers failed to warn investors and protect them from the market volatility.
What exactly were those so-called investments in the UBS-YES program and why did this happen two years in a row? One explanation is that volatility in the market created by the unforeseeable virus caused the loss. Some say it was the extreme volatility that killed the “iron condor” option strategy; the success of that strategy was supposedly dependent upon the price of the S&P 500 Index future contracts staying within certain spreads the managers created in each separately managed account utilizing that strategy. Now UBS argues this risk was adequately disclosed in marketing materials, but that’s not how investors say the managed account program was generally represented by their financial advisors to them.
After all, the high net worth investors – the so-called “smart money” investors – were not being promised huge returns for investing in the UBS-YES program. It was represented as a “low risk” strategy to enhance investors’ returns slightly above the yields in the fixed income market. We have heard 3% to 5% was the rate of return touted by many UBS financial advisors. Yet, in late 2018, and then again in February 2019, the UBS-YES strategy realized over 20% in losses. In March 2020, it has been estimated that investors still in the program suffered another 20% loss when the virus caused market panic and whipsawed the S&P 500 futures contract market. The low returns and high risk of the UBS-YES strategy really begs the question: Why would the “smart money” investors take that risk unless the UBS-YES strategy was misrepresented and/or managed differently than it had been managed in the past.
The theory of mismanagement has been posited by the Economic PhDs at the Securities Litigation and Consulting Group. See, McCann, Meng and O’Neal, UBS’s Yield Enhancement Strategy (“YES”) Returns – and then the Losses – Were Caused by Equity Market Exposure (2020). They contend that the money managers were not executing a “market neutral” investment strategy. Rather, they believe the UBS-YES strategy involved “actively managed directional bets on the market” and that in late 2018 and early 2019, the managers made bad bets; that is, they bet against the market direction that followed. If the experts at SLCG are correct then UBSs’ representations in its marketing materials about the strategy as well as its financial advisors representations about the so-called “low risk” for an “enhanced return” investment strategy were false and misleading.
The UBS-YES strategy was run by the team of Matthew Buchsbaum and Scott Rosenberg of Flatiron Partners in the UBS private wealth management division. At its peak in 2018, the team purportedly managed close to $5 billion for over 1000 of UBS’ wealthiest clients. You needed a minimum net worth of $5 million and to pay a management fee of 1.75% per annum to be admitted to this exclusive club. Interestingly, the fee was not based upon the amount of assets actually traded but the amount of collateral dedicated to the strategy. This was a huge incentive to the UBS financial advisors to recommend the strategy and get clients to commit all of the assets in their accounts as collateral (many clients pledged municipal bond portfolios) for the option strategy without fully understanding and accurately explaining to their biggest and best clients the nature, mechanics and risk of the UBS-YES strategy in managed accounts at the brokerage.
Regardless of the reason for the cause of the loss (misrepresentation or mismanagement), there is no way you will recover your UBS-YES losses without some legal action. At The Law Offices of Robert Wayne Pearce, P.A., we represent investors who paid dearly for the UBS-YES strategy in FINRA arbitration and mediation proceedings. Among the claims we file are fraud and misrepresentation, breach of fiduciary duty, failure to supervise, and unsuitable recommendations in violation of FINRA rules and industry standards. Attorney Pearce and his staff represent investors across the United States on a CONTINGENCY FEE basis which means you pay nothing – NO FEES-NO COSTS – unless we put money in your pocket after receiving a settlement or FINRA arbitration award.
Contact Us For A Free Initial Consultation With Experienced UBS-YES Investment Attorneys In FINRA Arbitrations
The Law Offices of Robert Wayne Pearce, P.A. have highly experienced lawyers who have successfully handled many managed account cases and other securities law matters and investment disputes in FINRA arbitration proceedings, and they will work tirelessly to secure the best possible result for you and your case. For dedicated representation by an attorney with over 40 years of experience and success in structured product cases and all kinds of securities law and investment disputes, contact the firm by phone at 561-338-0037, toll free at 800-732-2889 or via e-mail.