UBS Asset Management in Canada

Views and opinions expressed are presented for informational purposes only and are a reflection of UBS Asset Management’s best judgment at the time a report was compiled, and any obligation to update or alter forward-looking statement as a result of new information, future events, or otherwise is disclaimed. Commentary is provided at a macro level and is not with reference to any investment strategy, product or fund offered by UBS Asset Management and is provided in Canada generally pursuant to the registration exemption provided for in Section 8.25(2) of National Instrument 31-103 and in Ontario pursuant to Section 34 of the Securities Act (Ontario) and does not purport to be tailored to the needs of the person or company receiving the advice.. The information contained in the materials should not be considered a recommendation to purchase or sell any particular security. The materials and content provided will not constitute investment advice and should not be relied upon as the basis for investment decisions. As individual situations may differ, clients should seek independent professional tax, legal, accounting or other specialist advisors as to the legal and tax implication of investing. Plan fiduciaries should determine whether an investment program is prudent in light of a plan's own circumstances and overall portfolio. UBS Asset Management services offered to Canadian persons are provided by UBS Asset Management (Canada) Inc., a Nova Scotia corporation. UBS Asset Management (Canada) Inc. is an indirect wholly-owned subsidiary of UBS AG and is registered as a portfolio manager and exempt market dealer (in all provinces of Canada), commodity trading manager (Ontario), adviser – commodity futures (Manitoba) and investment fund manager (Ontario, Quebec and Newfoundland), all pursuant to Canadian securities law. Materials may include forward-looking statements. Actual future results, however, may prove to be different from expectations. Past performance is no guarantee of future results. Potential for profit is accompanied by possibility of loss.

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Emerging markets Opportunities in emerging markets

Emerging markets

With their recovering economic growth and robust income generation, Emerging Markets (EMs) could provide investors with some interesting possibilities. Unlike developed markets, EMs can offer investment opportunities that aren't overly dominated by the "new normal" of sluggish economic growth, persistently low inflation, lower long-term bond yields and flat yield curves. In particular, the combination of increasing working-age populations and their rising incomes throughout many EMs could drive spending across a number of sectors.


Latest insights

Emerging markets debt - The song remains the same

Emerging markets debt – The song remains the same

As it was the case in the first half of the year, emerging markets delivered strong returns during the third quarter of 2017, reflecting the effects of low inflation and global economic recovery.

Fighting with both hands

Fighting with both hands - What a stronger Xi Jinping means for China's outlook

China's NPC meeting has major implications for investors. Xi Jinping's stronger power base following the National Party Congress (NPC) means he will fight with both hands on an agenda that will prolong China's mini-cyclical slowdown but create attractive opportunities.

China's mini-cyclical slowdown will have a global impact

China's mini-cyclical slowdown will have a global impact

Our China market outlook offers an overview of China’s economic backdrop and assesses the implications of recent reform policies and policy action.

Chinese bonds – what’s the big deal?

Chinese bonds – what’s the big deal?

In this paper, we discuss the transformation in China’s bond market and the implications for global investors as more and more Chinese entities start to raise capital in the onshore bond market.

Emerging markets equities

Emerging markets equities

Geoffrey Wong, Head of the Global Emerging Markets Equity investment team, discusses his views on the new normal in emerging markets and where he sees opportunities for investors.

Chinese equities: Over the great wall

Chinese equities: Over the great wall

The UBS Emerging Markets and Asia Pacific Equities team explore China’s debt and growth woes that are obscuring opportunities in new-economy Chinese equities.

Riding a new wave - Emerging markets: The new normal

Riding a new wave - Emerging markets: The new normal

The "New Normal" environment of lower long-term bond yields and a flat yield curve is forcing investors to search for new investments.

Investing in China - How to capitalize on the equity opportunity

Investing in China - How to capitalize on the equity opportunity

Members of UBS Asset Management's Global Emerging Market and Asia Pacific Equities teams discuss big changes in the Chinese economy, how to gain exposure to China and other emerging markets, and long-term investment opportunities.

Investing in emerging markets in the new normal

Investing in emerging markets in the new normal

The UBS Emerging Markets Equities investment team considers the current challenges in emerging markets, stabilization in Asia and the turnaround potential outside Asia.


Investment strategies

Benchmark

MSCI China A (net)

Objective

The China A Equity strategy is a pure equity portfolio, investing mainly in China A-shares, built with a distinctive investment philosophy that focuses on intrinsic value. Our goal is to provide access to the Chinese A-share equity market in a sustainable and risk-controlled manner. The strategy invests for the long term.

Investment philosophy and process

We combine the secular growth story with a relentless focus on value. Each analyst focuses on specific sector(s) and identifies stocks with a significant discount to their intrinsic values, winnowing down the investment universe in several steps. Portfolio candidates are debated and discussed between analysts and portfolio manager through a peer review process. This results in a tightly controlled yet diversified portfolio of 20 to 60 high-conviction plays, opening up a source of true alpha for investors in China. Risk is integral to the process and all portfolios are monitored to avoid uncompensated risks.

Benchmark

MSCI China (r)

Objective

The China Equity Opportunity strategy is a pure equity portfolio, built with a distinctive investment philosophy that focuses on intrinsic value. Our goal is to provide access to the Chinese equity market in a sustainable and risk-controlled manner. The strategy invests for the long term.

Investment philosophy and process

We combine the secular growth story with a relentless focus on value. Each analyst focuses on specific sector(s) and identifies stocks with a significant discount to their intrinsic values, winnowing down the investment universe in several steps. Portfolio candidates are debated and discussed between analysts and portfolio manager through a peer review process. This results in a tightly controlled yet diversified portfolio of 40 to 70 high-conviction plays, opening up a source of true alpha for investors in China. Risk is integral to the process and all portfolios are monitored to avoid uncompensated risks.

Benchmark

J.P. Morgan Corporate Emerging Markets Bond Index Diversified

Objective

Seeks to outperform the benchmark by investing in emerging markets corporate bonds denominated in USD, and may also invest in emerging markets sovereign and/or quasi-sovereign bonds should corporate bond risk premiums over sovereign bonds be deemed unattractive.

Investment philosophy

We employ top-down macroeconomic and bottom-up credit research to develop investment themes and select appropriate securities.

Investment process

By balancing top-down and bottom-up analysis, the investment process brings together extensive experience as well as a diversity of thought and opinion from the fixed income investment committee, the emerging markets debt strategy team, and the credit research team - supported by quantitative tools and models.

  • Top down analysis focuses on the global macro framework. It explores global macroeconomic trends, examines macroeconomic factors, and scrutinizes the macroeconomic risk framework.
  • Bottom-up analysis focuses on countries and sectors, considering economic, political and social factors.
  • Based on the combined results, the overall allocations and risk budget are defined for the strategy, which is then implemented in specific portfolios with individual exposures to regions, countries, sectors, spreads, and currencies.
  • Each portfolio is subject to continuous monitoring of positions and risks.

Benchmark

J.P. Morgan Emerging Markets Bond Index Global (EMBIG)

Objective

Outperform benchmark by investing in a wide range of emerging market fixed income securities issued by sovereign, agency and corporate borrowers.

Investment philosophy

  • Discrepancies sometimes occur between securities' market prices and their fundamental values.
  • In the case of emerging markets debt, price volatility can exceed that of underlying macroeconomic fundamentals.
  • We seek to take advantage of these discrepancies by using a disciplined approach to estimate fundamental value.

Investment process

  • Credit selection - In our price/value framework we search for bonds with the potential to deliver strong performance, given the firm's country and market views.
  • Risk management - During portfolio construction we evaluate potential trades within a risk management framework, which compares our portfolio to its benchmark.
  • Feedback - Detailed analysis allows us to measure the impact of every country and security decision made.

Benchmark

Custom EME Benchmark

Objective

The Emerging Markets Equity strategy seeks to outperform the custom EME benchmark by 500 basis points (gross of fees) on an annualized basis, with active risk of up to 12 percent over a full market cycle, typically three to five years.

Investment philosophy and process

The Emerging Markets Equity strategy follows a price to intrinsic value approach. Internally generated research, focused on longer term value drivers at the industry, stock and country level, is used to estimate fundamental value for stocks, upon which investment decisions are made. The price to intrinsic value investment philosophy means we pay great attention to investment fundamentals and expected cash flows when assessing investments (a bottom-up approach). The process begins with in-depth research conducted by analysts who are sector specialists. Our objective is to develop unique insights that enable us to have a clearly differentiated investment thesis against the consensus in the market. An important part of this is our ability to seek out unconventional sources of information. The analysts present their analysis and conclusions to the Portfolio Managers, who rigorously review and challenge the views. It is the role of portfolio manager at the portfolio construction stage to take the best ideas of the analysts and construct a portfolio to best meet the client objectives. Risk is integral to the process and all portfolios are monitored to ensure we are not taking uncompensated risks.

Benchmark

MSCI Emerging Markets (net) (in USD)

Objective

The Emerging Markets Equity HALO strategy seeks to outperform the MSCI Emerging Markets benchmark by 500 basis points (gross of fees) on an annualized basis, with active risk of up to 12 percent over a full market cycle, typically three to five years.

Investment philosophy and process

We believe that a high-conviction portfolio, which exploits the inefficiencies uncovered through a long-term price to intrinsic value methodology, provides the opportunity to maximize alpha. Our estimate of intrinsic value is determined by the fundamentals that drive a company’s future cash flow. Our focus is on valuations and quality (industry structure, profitability and corporate governance) as we invest for the long-term benefit of our clients.

Our process begins with research conducted by the analysts, based on our investment philosophy. Our objective is to develop unique insights that enable us to have a clearly differentiated investment thesis against the consensus in the market. An important part of this is our ability to seek out unconventional sources of information. Not only do we talk to the companies we invest in directly, we also engage with suppliers, competitors and other industry experts. This deeper research and a longer investment horizon can uncover more opportunities to add value for our clients. Risk is integral to the process and all portfolios are monitored to avoid uncompensated risk.

It is the role of the lead portfolio manager, Urs Antonioli, to take the best ideas of the analysts and construct a portfolio that best meets the client objectives. Final portfolio decisions are made by the Portfolio Construction Committee, chaired by Geoffrey Wong. For each proposed stock the associated analyst is directly involved in the decision-making process and held accountable for its success in the portfolio.

Benchmark

MSCI Emerging Markets

Objective

The Emerging Markets Sustainable strategy seeks to identify high long-term capital growth companies that provide products and services with a clear environmental and social benefit along with a high degree of resource efficiency. These tend to be young fast growing companies that address the sustainability challenges of the 21st century in emerging markets. These include UN Millennium Goals such as:

1) Eradication of extreme poverty and hunger
2) Achieve universal primary education,
3) Combat HIV/AIDS, malaria and other diseases, and
4) Ensure environmental sustainability.

The portfolio manager seeks to manage exposure to value and growth using a blended style (i.e. style agnostic), which can vary in emphasis depending on the phase of the market cycle. The strategy is benchmarked to the MSCI Emerging Markets Index with an ex-ante tracking error of up to 10%.

Investment philosophy and process

The Emerging Markets Sustainable strategy applies a positive selection approach to identify companies that make positive contribution and address large and growing environmental (e.g. “Climate change”, “Water”) and social related challenges (“Social Development”). The strategy targets pure play, quality companies offering products, services and solutions with clear environmental benefits and a high degree of resource efficiency in sectors whose growth potential, in our opinion, has been underestimated by the market. “Climate change” covers the subsectors of cleaner energy & mobility, renewable & energy efficiency, waste & recycling. “Water” reflects utility, technology & infrastructure, treatment and efficiency. The third theme “Social Development” divides into healthcare products & operations, access to finance, access to communication, affordable housing, reduction of healthcare costs, nutrition as well as education.

Our investment process relies on the identification of potential investment opportunities through qualitative and quantitative disciplines which are then subjected to intensive fundamental research to select the best ideas for the strategy. In determining the attractiveness of a stock we may also utilize qualitative research from a relatively small number of specialist sources which have been developed over a long time period and have a history of adding value. These external sources complement and challenge our internal research findings.

Benchmark

UBS Greater China Index (comb)

Objective

The Greater China Equity strategy is a pure equity portfolio built with a distinctive investment philosophy that focuses on intrinsic value. Our goal is to provide access to the Chinese equity market in a sustainable and risk-controlled manner. The strategy invests for the long term, with a focus in Hong Kong, Taiwan and offshore-listed China equities.

Investment philosophy and process

With the Greater China Equity strategy, we combine the secular growth story with a relentless focus on value. Each analyst focuses on specific sector(s) and identifies stocks with a significant discount to their intrinsic values, winnowing down the investment universe in several steps. Portfolio candidates are debated and discussed between analysts and portfolio manager through a peer review process. This results in a tightly controlled yet diversified portfolio of 60 to 100 high-conviction plays, opening up a source of true alpha for investors in Greater China. Risk is integral to the process and all portfolios are monitored to avoid uncompensated risks.