The first vehicle will be a UK fixed income fund slated for launch in early Q2, subject to internal and regulatory approval.
UBS said the move to bring its existing passive strategies to retail investors in the UK is in response to demand from clients.
Steve Hutton, head of UK wholesale, said: “We are seeing more interest in passive funds, and we expect this demand to grow in the future as the market starts to feel the effects of the RDR.
“Fixed income is a significant strength for UBS and we want to respond to the needs of our clients by building this capability.”
The group already runs a range of offshore passive funds, but the new launch will be the first passive fund to be offered to UK retail clients.
“We believe the passive range is suitable for the UK market. Institutional clients use our passive funds already, but it will be a new offering for retail clients,” he said.
Following the launch of the bond fund, the group will look to extend its passive fund range in both the fixed income and equity spaces.
UBS has been running passive strategies for over 30 years across asset classes, against both standard indices and customised benchmarks. It aims to deliver the returns of the underlying benchmark with very low tracking error by controlling risk and minimising costs.
UBS cut some underperforming active funds from its range last year, including the Absolute Return Bond fund in July and the US 130/30 Equity and Asian Equity funds in October.
The group is also reviewing the future of its £11m UK Smaller Companies fund, run by Frank Manduca, after it was fourth quartile in the IMA UK Smaller Companies sector for one, three, and five years.
However, UBS’ Hutton emphasised the group is not planning to move focus away from active management and the new funds will be complementary to the existing active capabilities.
Last year Scottish Widows Investment Partnership and Aviva Investors made a shift in the direction of passive investing, closing down a number of equity desks and moving some strategies from active to passive in an effort to cut costs.
Last month, Royal London Asset Management announced plans to shift to a passive approach on its Japanese and Far Eastern products, and managers Edward Chan and Jonathan McClure left their roles as a result.
Most recently, Henderson launched a range of four multi-asset passive funds under the Cirilium brand in a joint venture with Intrinsic.
Henderson said the new offering was “the result of client and adviser demand for a lower cost passive vehicle to act as an investment solution to meet their needs”.
Meanwhile, UBS also plans to bring the capabilities of its existing US-based Global Investment Solutions (GIS) team to the UK market, especially targeting the large restricted advice market.
The offering includes seven multi-asset funds, which Hutton said have been successful in the US, Japan and Europe.
The group will be looking to broaden out this offering and build solutions for wealth managers.
Categories: Managed solutions