The UBS Strategy Fund, one of the hottest launches in the fund industry, has flamed out and is heading for the history book after just three years. UBS hopes to merge the fund into its much smaller Global Equity fund. The decision to merge the larger fund into the smaller offering -- Strategy holds $417 million while Global Equity holds $58 million -- seems to be based on the relative track records of the two funds and the difficulties in selling a fund based on Wall Street analysts' stock picks.

UBS launched the Strategy Fund (which then carried the PaineWebber brand) at the peak of the bull market and initially sold it as way investors could track the brokerage's "highlight list" compiled by PaineWebber analysts. The list groups the most-liked stocks among PaineWebber's analyst team. In the final go-go days of the bull market, the firm was able to raise $2.1 billion in its initial subscription period. The fund was later re-labeled with the Brinson brand after UBS purchased Chicago-based Brinson.

Whatever the branding, the fund has suffered poor investment performance during the bear market, though, and lacks a longer track record to fall back on for marketing purposes. Its three-year annualized return is negative 24 percent while the Global Equity fund three-year return is negative seven percent. UBS has

It is also facing the marketing conundrum posed by the current unpopularity of Wall Street analysts. It comes as no surprise, then, that the fund is being quietly merged into an unrelated offering. The move also boosts the assets in the Global Equity fund to levels that may move the latter fund closer to profitability.

UBS' on the record explanation for the choice of merger partners is that the move will increase the ability of investors to achieve diversification.  

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