Articles Posted in Yield Enhancement Strategy

UBS Financial Services (UBS) brokers Matthew Buchsbaum and Scott Rosenberg are currently the subjects of multiple investor fraud claims by firm clients who blame them for losses they sustained from the UBS YES Strategy. This Yield Enhancement Strategy (YES) is a complex investment strategy and it is not suitable for every investor.

Involving an options overlay strategy, the UBS YES Strategy uses four options having the same expiration date but different strike prices. It employs the strategic buying and selling of SPX options spreads.

UBS YES Strategy investors were told to expect “incremental returns” along with the chance to earn income through low yield assets. 

Clients of UBS Group AG (UBS) who employed the firm’s Yield Enhancement Strategy (YES) are now filing investor fraud complaints after suffering at least $60M in losses to date. YES involves options trades and borrowing that was supposed to be “safe” and low risk while earning investors positive returns.

The complex investment strategy did just that while the market was stable but the volatility that ensued last year–the worst to hit the market in 30 years– caught investors by surprise. The Wall Street Journal reports investor losses of over 13% in one month alone. However, Seeking Alpha reports that losses have been as high as 20% for some investors.

For example, according to the WSJ, Sherrie Pellini, a 60-year-old UBS customer who financially supports her mom and three kids, invested $3M in the UBS YES Strategy and was charged 1.75%. She now claims her losses were $750K. Pellini is accusing UBS broker Robert Perlman of telling her that YES had not resulted in any losses for 17 years.

Over the last several months, it has come to light that brokers from some of the largest firms on Wall Street firms sold Collateral Yield Investment Strategies (CYES Strategies) that may not have been suitable for many investors, causing them to suffer devastating losses. Offered through registered investment adviser Harvest Volatility Management, LLC, the CYES Strategy is a type of Yield Investment Strategy (YES Strategy), only even more risky and complex.

YES Strategy Investments

Reportedly, UBS (UBS), Credit Suisse (CS), Bank of America’s (BAC) Merrill Lynch, Morgan Stanley (MS), and other brokerage firms brokers sold YES Strategies to many wealthy investors, touting the approach as safe way to increase returns on conservative portfolios. These were supposed to be small returns at a low risk, using a strategic approach that involved the purchasing and selling of SPX index options spreads.


Shepherd, Smith, Edwards & Kantas Investigating Firms Selling Harvest Volatility Management Strategies’ Collateral Yield Enhancement Strategy

The law firm of Shepherd, Smith, Edwards & Kantas (“SSEK Law Firm”) is investigating several firms that have been selling Harvest Volatility Management Strategies as a safe way for customers to earn extra income from their investment portfolio.  The long period of historically low interest rates that have existed since at least 2008 has resulted in the creation of a number of brokerage firm products that are meant to combat the low return investors receive in traditional income investments, such as money markets or CDs, but provide similar safety.

One such investment product that has become popular, but proven to be far riskier than represented to investors, is the so-called “Yield Enhancement Strategy”, or the “YES” investment.  We have previously written on the UBS Yield Enhancement Strategy and the number of investors who lost significant money with that investment when the real risk of the product was revealed in February 2018.

Investors in supposed “Yield Enhancement” strategies are learning that the purported safe investment program has significant risk. The Yield Enhancement Strategy (YES) that UBS Financial Services, Inc. (UBS) and other brokerage firms used was marketed as a “safe and efficient” way to enhance the return on a conservative portfolio.

The YES program was represented as an investment program that involved using options strategies that produced small returns but with small risks. UBS is one of a number of brokerage firms that touted the YES approach to customers as a way to make money via the “strategic” buying and selling of SPX index options spreads. The returns were purportedly “incremental” to “underlying asset returns” while giving clients a chance to possibly make money from low yield assets.

Seeking Alpha reports that the brokerage firm told clients that their UBS Yield Enhancement Strategy involved allowing a “mandate” or margin to be placed against their respective portfolios and that this would then be used, via an “iron condor” options trading strategy, to generate returns. It was these particular investors that have sustained the greatest losses when excessive volatility in December—the most that the market has encountered in 30 years—caused the YES strategy to fall.

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