Australian investors spent much of the review period moving away from directional positions towards overlays – structures that let them hedge, rotate between sectors and factors, or add thematic exposure without rebuilding portfolios. UBS built its Australian derivatives business around that shift, tailoring solutions to each client’s mandate rather than selling standard products.
Its structuring work spanned asset classes. For an Australian wealth manager seeking protected exposure to Chinese equities, UBS created an Australian dollar capital-protected note linked to the CSI 300, giving investors enhanced participation in index gains while preserving their capital at maturity. For an institutional investor, it designed a hedging overlay aligned with regulatory capital rules, stress-tested against severe equity sell-offs and volatility spikes, and built to protect against deep drawdowns while keeping carry costs low. Another client gained diversified multi-asset exposure through an Australian dollar quanto option on one of UBS’s proprietary indices, packaged in a note with a defined maximum loss.
UBS built its Australian derivatives business around that shift [from directional positions towards overlays], tailoring solutions to each client’s mandate rather than selling standard products
Corporate hedging was equally bespoke. UBS structured copper average-price swaps that allowed an Australian corporate to lock in elevated prices for future production, routing execution through its European commodities desks to trade when liquidity was deepest. For another company, it put in place a zero-cost collar strip converting expected US dollar revenues into Australian dollars, with execution triggered at predefined levels and monitored around the clock.
The bank also recycled risk across its client base. It executed ASX 200 dispersion trades and variance swaps with Australian superannuation funds, matching demand for volatility from one client segment with supply from another, enabling it to price large trades competitively. That capability matters in a pension system holding AUD4.5 trillion ($3.1 trillion) in assets and expanding its use of derivatives.
