Investment themes

Using thematic investing to help you meet your investment challenges

Investors are facing unprecedented challenges in today's global markets. Finding answers can be hard. We have identified a few key investment themes and matched our investment solutions around each, helping you to meet your investment challenges.

Sustainable and impact investing

Investing with a new set of eyes

Modern sustainable investing is all about that providing our clients with new important new tools to help build stronger portfolios and generate better, more sustainable, returns.

Why is this so?

Sustainable investing is about broadening the use of material, non-financial data in the investment analysis process to include ESG – or environmental, social and governance – metrics. By adding these metrics to the investment process, investors can get a broader view of the potential upside and downside of their investments. With that, they can make better informed investment decisions.

Seeing more clearly

Sustainable investing provides a new kind of transparency into our investments – achieved through a new set of metrics that give investors material, often quantitative, data into how well a business is run, where its real risks lie, and how sustainable its business model and practices really are. If fully embedded in the investment decision-making process.

No compromise

At UBS, we believe that sustainable investing adds value to portfolios within the same risk-return profile. That is why UBS Asset Management has made a strategic decision to bring sustainable investing into the mainstream of our offering to all of our clients.

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Opportunities in emerging markets

We see consumer spending, healthcare, real estate, and information technology as the key growth themes in emerging markets. However, the environment is dynamic. It is influenced by various diverging growth trends, and faces many political and economic challenges including industrialisation and the digital revolution. We therefore believe that an active country, sector and security selection, based on exhaustive top-down and bottom-up research, is a prerequisite to add value to emerging markets portfolios.

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Toward normalisation – the uneven path to growth

July 2016 marked an inflection point from deflation to reflation. Bond yields started to rise on a brighter growth outlook. We expect global inflation, led by the US, to increase very gradually. In our view, the expected rise in US policy rates is likely to be the most modest and gradual normalization in the history of the Federal Reserve. However, the path to growth is likely to be uneven due to various risks, particularly the balancing act which will be necessary to exit successfully from ultra-accommodative monetary policy.

Against this backdrop, after a protracted period during which beta (the market) has dominated returns, we see a shift toward portfolio manager skills (alpha) playing a much greater role in generating returns. As rates go up, the pace of appreciation of equity markets slows. US equities in particular command rich valuation metrics and it is realistic to expect that over a 5 to 10 year forward view returns will be lower than those experienced over the past few years. In this phase of the cycle, every 50 basis points of alpha will be worth gold and the appetite for alpha-oriented strategies is likely to grow.

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Low yield

Low yields have presented a significant challenge to investors for a number of years. We see a moderate US-led reflation which is slow and expect inflation and interest rates to reach levels well below the average of past recovery peaks. While global growth is likely to pick up, yields are still at low or negative levels and we expect them to stay low in Europe and Japan in the foreseeable future.

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If you require further information please get in touch.

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