Investing.com -- Commodity trading advisers have slashed equity risk as geopolitical tensions surge, according to UBS.

The bank’s strategist, Nicolas Le Roux, wrote on Tuesday that CTAs “have cut 75% of their global equity exposure since the start of the Middle East conflict, leaving them close to neutral on the asset class.”

While they still “have room to sell more,” UBS said its modelling suggests the pace of selling “is likely to decelerate from here,” particularly in U.S. large caps.

The firm even expects “a little bit of CTAs buying in Chinese indices.”

“In bonds, it has been the worst-case scenario for CTAs. After aggressively buying duration in February, they spent the first half of March reselling 80% of what they just bought,” Le Roux wrote.

The strategist warned in his note that “more pain appears to be in order,” with another $100 million to $140 million of global DV01 selling possible if yields fail to stabilise.

In credit markets, CTAs are “selling fast and big,” with expected flows of “-20% and -90% of ADV,” a scale UBS said is likely to impact pricing.

Currency positioning has also shifted sharply, with CTAs “rushing to cover their USD shorts.”

UBS estimates they have already bought back $150 billion to $175 billion and expect another $70 billion to $80 billion in the next two weeks, noting that “negative beta & positive carry assets like the USD will likely remain popular” until geopolitical tensions ease.

CTAs are also deleveraging commodities positions as volatility climbs, though UBS noted that agriculturals remain an area “where CTAs have room to buy.”