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Multi asset portfolioUBS ETF MAP Balanced 7 SF UCITS ETF combines a broadly diversified portfolio with carefully considered risk management

ETF MAP Balanced 7 SF UCITS ETF

A complete asset management solution via a single investment product – and with the low fees of an index fund. UBS ETF MAP Balanced 7 SF UCITS ETF provides investors with the opportunity to invest in equities, bonds, commodities and cash through the basis of a multi-asset investment strategy. Carefully considered risk management ensures that price fluctuations remain within the predetermined limits. The strategy is implemented in four steps. 

Learn step by step how you can create a multi asset portfolio

The multi-asset strategy of UBS ETF UBS ETF MAP Balanced 7 SF UCITS ETF is based on a dynamic multi-stage allocation process. This ensures that:

  • Your portfolio is well diversified
  • Market risk remains under control at all times
  • The asset allocation can be adjusted tactically in line with market conditions in an appropriate manner 
  • The value of the portfolio does not fluctuate too much – but not too little, either

Find out in detail how these individual steps work:

Multi-stage allocation strategy  of UBS ETF MAP Balanced 7 SF UCITS ETF

Figure 1: The multi-stage allocation strategy of UBS ETF MAP Balanced 7 SF UCITS ETF; Source: UBS

The UBS MAP Balanced 7 strategy adheres closely to the traditional principles of risk management (diversification). The multi-asset portfolio comprises four different asset classes:

Each of these asset classes has its own risk return profile, which comes to the fore during different phases of the market cycle.

The active portfolio is made up of equities, bonds and commodities. Its primary objective is to enhance the value of the portfolio. The portfolio's equity component contains blue chips companies from Europe and the US and is represented by the Euro Stoxx 50 and S&P 500 equity indices.

The bond portfolio replicates the performance of five-year and ten-year government bonds from the US and the Eurozone.

Finally, the commodities allocation replicates the performance of the UBS Bloomberg CMCI Composite TR. This index offers investors broad diversification across 27 different commodities.

The cash component serves as a reserve asset in phases of heightened stress.

Structuring the multi-asset portfolio

The second portfolio construction component ensures that the market risks within the multi-asset portfolio remain under control. At regular rebalancing dates, each asset class weight in the active portfolio is adjusted in such a way that its contribution to the portfolio's overall risk remains the same as that of other asset classes. This is the principle of risk parity.

This means that asset classes subject to greater price fluctuations (volatility) are given a lower weighting in the portfolio than less risky asset classes. If the volatility of one asset class falls relative to the others, its portfolio weighting is increased, and vice versa.

Equities and commodities in particular offer investors the chance of high returns. However, higher returns go hand in hand with the risk of substantial losses should there be a financial market crisis.

In order to curb this risk, the UBS Multi-Asset Portfolio possesses a further risk management mechanism. During times of heightened market stress, this mechanism shifts the assets invested in the two risky asset classes of equities and commodities into cash.

To estimate the sentiment on the global financial markets, the UBS Multi-Asset Portfolio Balanced 7 strategy uses the UBS Dynamic Equity Risk Indicator (DERI). This indicator measures various market factors. A single value is then generated, which makes it possible to see whether market sentiment is positive (bullish), neutral or negative (bearish).

The final step is the fine-tuning of portfolio risk: The target volatility objective of the UBS MAP Balanced 7 strategy is an annualized volatility of 7%.

In order to achieve this goal as close as possible, the balance between the active portfolio and cash can be dynamically adjusted on a daily basis and as soon as the portfolio's actual level of volatility either falls below 6% or exceeds 8%.

If the realized volatility of the strategy is lower than desired, investments can be made in the Multi Asset Portfolio with leverage up to a strategy total exposure of 200%. If, however, the level of volatility of the strategy is too high, the cash weighting is increased.

How the volatility control of the UBS MAP Balanced 7 Strategy works

Multi Asset investing in focus


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