UBS Innovative Balanced Index

A rules-based index that uses early reads in US economic growth and inflation to inform an innovative balanced allocation.

UBS Innovative Balanced Index overview

The UBS Innovative Balanced Index (the “Index”, “UBS-IBAL Index” or “UBSIBAL”) is a rules-based index that leverages unique signals which aim to provide an early read into the US macro environment and inform an all-weather tactical allocation to equities, commodities and bonds.

The signals include US inflation expectations and a Nowcast of US economic growth, generated using key datasets from UBS Evidence Lab, the largest sell-side alternative data offering of its kind.

In addition, each one of the three asset sleeves is designed to produce less correlated returns while using simple components such as US equity sector indices, commodity futures and 10Y US Treasury futures.

The Index targets a volatility of 7% with the goal of providing smooth and stable returns over the long run.

Ticker:

UBSIBAL Index

Latest closing level:

542.9102

Closing level as of:

16 May 2024

Single-day % change:

-0.29%

Using alternative assets for differentiated returns from the world’s largest wealth manager

The UBS Innovative Balanced Index aims at:

Using advanced reads into the US macro environment

The Index adapts its allocation through early reads into US macro economic environment using inflation expectations and growth Nowcast. Growth Nowcast is produced by UBS Evidence Lab, part of UBS Research, and the largest sell-side alternative data offering of its kind.

Producing differentiated returns through alternative assets

The Index provides access to US equity sectors, bonds and an alternative commodity strategy taking advantage of the supply/demand imbalances across The strategy has exposure to 21 commodities as of December 2022. The number of commodities in the strategy could vary year over year based on UBS Commodity Alpha Beta-Neutral Strategy Index composition.1 The underlying commodity strategy is expected to perform best in high inflation environments with live performance since 2011. 

Delivering smooth and stable returns
 

The Index seeks resilient returns in various rate environments by using a dynamic bonds allocation. Combined with the volatility risk control, these mechanisms aim at producing smooth and stable returns over the long run.

1 The strategy has exposure to 21 commodities as of December 2022. The number of commodities in the strategy could vary year over year based on UBS Commodity Alpha Beta-Neutral Strategy Index composition.

Video

UBS-IBAL Index video

Signals

Forward-looking indicators to inform allocations

The allocation to the three asset sleeves utilizes a risk-based approach with target risk budgets based on two forward-looking indicators, updated on a monthly basis.

Growth Nowcast indicates either one of two states: acceleration/stability or slowdown.
  • Two states: Acceleration/Stability or Slowdown
  • Leverages UBS Evidence Lab, part of UBS Research
  • Two states: High or Low
  • Uses market-implied inflation expectation to construct the inflation signal

Economic regimes

Economic regimes and associated risk budgets

Risk budgets are allocated every month across Smart Equities, Advanced Commodities and Dynamic Bonds depending on the growth and inflation regime combinations.

In the current economic state, we are experiencing stable or acceleration in growth with high inflation.

Multi-asset exposure

Balanced multi-asset exposure

Smart Equities

The Smart Equities sleeve aims to adapt its US equity sector exposures based on the growth Nowcast and market-implied inflation regimes.

In the current economic state, we are experiencing stable or acceleration in growth with high inflation.
  • Select five US Equity sectors that are expected to perform best under the current growth and inflation regime
  • Sector selection helps produce differentiated returns compared to benchmark equity indices

Advanced Commodities

  • Designed to harvest returns from supply and demand imbalances across 21 different commodities
  • Live since 2011, uses UBS’s expertise in commodity investing
  • Expected to perform better in high inflation regimes
The Index yields returns via 21 commodity markets with options to Buy Forward or Sell Spot on the Bloomberg Commodity Index.

Dynamic Bonds

Provides exposure to 10 Yr. US Treasury futures with volatility control at bond sleeve level, signals and dynamic weighting.
  • Dynamic Bonds sleeve provides exposure to 10Y US Treasury futures, with a dynamic weighting mechanism
  • Exposure can dynamically respond and adapt to various rate regimes based on bond signals, potentially making it more resilient in a rising rate environment.

UBS Evidence Lab

UBS Evidence Lab & Growth State Nowcast

What is UBS Evidence Lab?

UBS Evidence Lab is a sell-side team of experts who work across 55+ specialized labs creating insight-ready datasets. The experts turn data into evidence by applying a combination of tools and techniques to harvest, cleanse, and connect billions of data items each month1. 

Why use Nowcast in UBS Innovative Balanced Index?

Non-traditional big data, such as credit card data, rail and shipping volumes, auto sales, air traffic, building permits, etc., are used to generate a Nowcast of several key monthly US economic indicators unconstrained by, and often weeks before, official data release cycles. The Nowcasts of these key indicators are subsequently used to derive a monthly growth state Nowcast to inform asset allocation of the Index.

Investment Edge

Strong evidence for the anticipatory investment signal embedded in UBS Evidence Lab data2

Asset Allocation

Potential improvement in risk-adjusted return by adapting risk budgets based on nowcasting signal and position allocation ahead of general market reactions.

Sector Rotation

Tactical sector rotation within Smart Equities sleeve ahead of general market reactions.

Hidden in Plain Sight: Documentary Series

1 See Disclaimer section for further information on UBS Evidence Lab and the provision of Nowcast
2 Source: UBS Global Research, How to time the market with a US growth Nowcast, April 2, 2019

Volatility control

Volatility control

To target a volatility around 7% over the long term, the Index measures both the volatility of the Index over short time periods and over long time periods.

Volatility of the Index is measured daily via lookback windows. Leverage is used to target 7% volatility and capped at 250%.