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The war in the Middle East and subsequent closure of the Strait of Hormuz is shifting the global economy from a “goldilocks” state (steady growth and falling inflation) towards stagflation (lower growth and rising inflation). The recent rebound in risk assets, albeit welcome, may prove short-lived with supply chain disruptions underway as energy prices and shipping costs rise and global inventories are depleted. More expensive food prices are expected later in 2026 as current fertilizer shortages impact crops. While a prompt reopening of the Strait of Hormuz may shorten a potential inflation surge, this episode once again showcased the weaponization of physical resources, which could intensify hoarding behavior and price volatility in the future.

That said, supply inflation could be alleviated by a commensurate decline in demand. AI could also be a deflationary factor as it materially lowers prices for “information goods” (e.g., software) and replaces labor. The governments’ response to support basic consumption will likely define the final outcome. Given the complexity of the economic factors at play, the outlook for global growth remains uncertain, thus driving risk premia and correlation instability across asset classes higher.

Trading

In Trading, we maintain conviction in DM discretionary macro strategies. The oil supply shock may lead to greater divergence in central bank decisions and fiscal policies, potentially creating opportunities in cross-market rates and FX trading. Equity thematics should remain relevant, particularly in areas such as defense, infrastructure, and other cyclical sectors impacted by the recent market sell-off. We acknowledge that heightened geopolitical uncertainty and managers’ lower risk levels following their March 2026 drawdowns could challenge directional risk taking in rates over the near term, but more sustained directional trends could emerge across asset classes as we obtain more clarity. For EM macro, assuming no material escalation in the Middle East, the near-term opportunity set remains relatively attractive, supported by high carry, a benign USD backdrop, and some unwinding of consensus positioning that has created more attractive entry points.

Estimated GDP growth in various energy price scenarios

Equity Hedged

Our exposure to Equity Hedged has been at the higher end of historical range given the broadening alpha opportunities across regions and sectors. We believe the opportunity set for Equity Hedged remains robust, incrementally shaped by AI winners / losers and geoeconomics. However, as observed among broader asset classes, the correlation between Trading and Equity Hedged could potentially be less reliable than in recent history, and as a result, we are marginally reducing Equity Hedged exposure in favor of more defensive Relative Value sub-strategies, which often exhibit lower correlation.

12-month rolling correlation: HFRI Equity Hedged vs. HFRI Macro

Credit / Income

Within Credit / Income, we believe the strategy continues to be well positioned for the current environment as dispersion is likely to remain elevated. While the strategy can lag in strong risk-on markets, the overall return profile remains favorable. The ABS / Other Income strategy continues to target high yielding, fundamentally stable assets, with no meaningful change in expected returns for the strategy since the beginning of 2026, given relatively consistent base rates and spreads in the space.

US High Yield YTW (yield to worst)

Relative Value

In Relative Value, we plan to maintain our exposure to fixed income relative value (FIRV). Our probability-weighted expected return for FIRV strategies has increased, and while we have not yet observed notable distortions in funding markets or cash / futures basis, any deterioration in macro risk sentiment would likely push rates volatility higher, which should be supportive for micro RV strategies as well as tactical macro themes. In addition, many crowded macro RV trades have become dislocated and offer more attractive entry levels. We also remain constructive on quantitative equity. Recent performance has been consistent with liquidity provision dynamics in a choppy trading environment, and the strategy’s resilience through a volatile Q1 highlighted its positive diversification properties. For merger arbitrage, we see sustained momentum in global M&A as corporates and sponsors act within a strategic window defined by national priorities such as energy independence, the accelerating race for AI leadership, and critical minerals necessary for defense and manufacturing. Agency mortgage derivatives provide another source of attractive carry in portfolios, and we plan to maintain our exposure as valuations improved in 2025.

MOVE Index

The views expressed are as of April 2026 and are a general guide to the views of Unified Global Alternatives - Hedge Funds (“UGA - HF” or “UGA - Hedge Funds”). This document does not replace portfolio and fund-specific materials. Commentary is at a macro or strategy level. This publication encompasses UGA - HF's views based on our internal manager universe and are subject to change. The universe includes managers that are either invested in or followed by UGA - HF and does not represent all hedge fund managers and strategies available in the industry. These views are subject to change.

The strategies described herein are speculative and entail substantial risks which may place your capital at risk. An investment in these strategies includes the risks inherent in an investment in securities, as well as specific risks associated with limited liquidity, the use of leverage, short sales, options, futures, derivative instruments, investments in non-US securities and illiquid investments. The Fund invests largely in other unregulated hedge funds. Such a portfolio of hedge funds may increase an investor's volatility for potential losses or gains.

A particular manager of any strategy, from time to time, may invest a substantial portion of the assets managed in an industry sector. As a result, the manager's investment portfolio may be subject to greater risk and volatility than if investments had been made in the securities of a broader range of issues. There can be no assurances that any particular strategy (hedging or otherwise) will be successful or that it will employ such strategies with respect to all or any portion of its portfolio. These strategies can be highly illiquid, are not required to provide periodic pricing or valuation to investors, and may involve complex tax strategies.

The strategies may be highly leveraged and the volatility of the price of its interests may be great. The fees and expenses charged by any individual manager of a strategy may substantially offset any trading profit. 

Index descriptions

The use of indices is for illustrative purposes only.