The UBS House View Monthly presents the latest version of the UBS Investment House View, assessing the impact of current economic trends on asset classes and portfolio allocation.
The end of the year is a time to reflect on past successes and plan for the months to come. Regular readers will know that we took our portfolio management responsibilities seriously, held some contrarian views, and added value overall with our market calls. Yet the question of our social responsibility as portfolio managers is coming up more and more. For 20 years I answered that question by citing the influential article, “The Social Responsibility of Business is to Increase its Profits,” by Nobel prize-winning economist Milton Friedman.
But I now believe investors must consider social responsibility when making investments. This is not because I would advocate mixing investing and philanthropy: there is little room for emotion in investment decisions. Rather it’s because the investment world has changed. A more transparent world means that environmental, social, and governance (ESG) factors are now more easily measured and are increasingly internalized into market prices. There is now strong evidence that thinking about social responsibility as part of the investment decision-making process does not sacrifice returns. Indeed, it can actually help de-risk, diversify, and enhance them.
The sustainable investment market has broadened and deepened, particularly into fixed income instruments, such as green bonds. This means that private investors can now achieve the goals of traditional diversified portfolios with sustainable assets. Sustainable investing can now move from the “satellite” to the “core” of an investor’s portfolio.
We are striving to be the leader in sustainability and sustainable investing (SI). You can read more about our efforts on our page UBS and Society.
In our tactical asset allocation this month, we remain overweight in global equities, a position that remains supported by strong global economic data. In addition, we are opening two new positions: an overweight in a basket of four high-yielding emerging market currencies (Brazilian real, Indian rupee, Turkish lira, Russian ruble) against a set of four pro-cyclical lower yielding counterparts (Australian dollar, Hungarian forint, Norwegian krone, Taiwan dollar), and an overweight in EM local currency bonds against high grade bonds.
Global Chief Investment Officer Wealth Management
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