UBS ETF In order to proceed, you must confirm that you are a qualified or institutional investor based in the United Kingdom.

It is not aimed at, and must not be relied upon by, Retail Clients. This website is not directed at persons in any other jurisdiction, including the United States. This information is not an invitation to subscribe for units or shares in the funds described herein and is by way of information only.

UBS does not give investment advice or recommendations in respect of its product range.

This web site includes both regulated and unregulated products. You should be aware that unregulated products do not carry the same degree of protection as regulated products. Unregulated schemes may only be marketed to clients in accordance with Chapter 4 of the FCA’s New Conduct of Business Sourcebook (COBS) and the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) Exemptions Order 2001, as amended.

Please note that this webpage gives Professional Investors access to the entire UBS ETF product offering. Therefore, some products on this webpage may NOT be authorized, recognised or registered for public offering neither in your country and as the case may be nor in any other country. No public marketing must be carried out for it. No marketing material must be handed out to clients on any occasion. The presentation of marketing material in client halls is strictly forbidden. Reference to these funds in client mailings must not be made. In case that you don't want or are not allowed to see the full ETF range, please do not proceed. Enter this site as Private Investor.

This website is a marketing communication. Any market or investment views expressed are not intended to be investment research. The website has not been prepared in line with the FCA requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. The information contained in this website should not be considered a recommendation to purchase or sell any particular security and the opinions expressed are those of UBS Asset Management and are subject to change without notice. Furthermore, there can be no assurance that any trends described in this website will continue or that forecasts will occur because economic and market conditions change frequently.

Persons who access the material made available by UBS Asset Management at this website ("UBS website”) agree to the following

The entire content of this UBS website is subject to copyright with all rights reserved. You may download or print out a hard copy of individual pages and/or sections of the UBS website, provided that you do not remove any copyright or other proprietary notices. Any downloading or otherwise copying from the UBS website will not transfer title to any software or material to you. You may not reproduce (in whole or in part), transmit (by electronic means or otherwise), modify, link into or use for any public or commercial purpose, the UBS website without the prior written permission of UBS.

While UBS uses reasonable efforts to obtain information from sources which it believes to be reliable, UBS makes no representation that the information or opinions contained on the UBS website is accurate, reliable or complete. The information and opinions contained in the UBS website are provided by UBS for personal use and informational purposes only and are subject to change without notice. Nothing contained on the UBS website constitutes investment, legal, tax or other advice, nor is to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision.

The past is not a guide to the future performance of an investment. The value of investments may fall as well as rise and investors may not get back the amount invested. Changes in rates of foreign exchange may cause the value of investment to go up or down.

The levels of and reliefs from taxation may change. Tax reliefs referred to are those currently available and their value depends on the circumstances of the individual investor. Although an investment held within an ISA may be free of further tax to the investor, the fund itself may have incurred other forms of taxation.

  • The annual management fees of the funds featured on this website may be charged wholly or partly to the capital of the fund. Where this is the case, whilst it will increase the fund’s yield, it will cause erosion of the capital value and affect the performance of the fund.
  • The yield on income funds may vary and you should contact UBS or your financial adviser to obtain up to date figures.
  • Some UBS funds may invest in emerging markets, this involves a high degree of risk and should be seen as long term in nature.
  • Smaller companies funds may invest in companies which may be less liquid than larger companies and subsequent price swings may be greater as a result.
  • Some funds may use derivatives as part of their investment process. Such instruments are inherently volatile and the fund could be potentially exposed to additional risks and costs.

Nothing on the UBS website should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.

The information and opinions contained on the UBS website is provided without any warranty of any kind, either express or implied.

In no event, including (without limitation) negligence, will UBS be liable for any loss or damage of any kind, including (without limitation) any direct, special indirect or consequential damages, even if expressly advised of the possibility of such damages, arising out of or in connection with the access of, use of, performance of, browsing in or linking to other sites from the UBS website.

The UBS Group and/or its directors, officers and employees may have or have had interests or positions or traded or acted as market makers in relevant securities. Furthermore, such entities or persons may have or have had a relationship with or may provide or have provided corporate finance or other services to or serve or have served as directors of relevant companies.

The UBS website is not directed to any person in any jurisdiction where (by reason of that person’s nationality residence or otherwise) the publication or availability of the UBS website is prohibited. Persons in respect of whom such prohibitions apply must not access the UBS website.

Telephone calls to UBS Asset Management may be recorded for your protection.

Information provided by you will be held in confidence by UBS Asset Management (UK) Ltd, UBS Asset Management Funds Ltd and its properly appointed agents and will not be passed on to other product or service companies. Your information may be used to send you information on other products and services offered by UBS Asset Management, a division and subsidiary of UBS AG. If you prefer not to receive such information please contact UBS Asset Management. The use of your personal information is governed by the Data Protection Act 1998.

All of the material on this UBS website is directed only at UK residents and is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell securities in any other jurisdiction other than the United Kingdom.

UBS Asset Management (UK) Ltd and UBS Asset Management Funds Ltd, are both registered in England, subsidiaries of UBS AG and are authorised and regulated by the Financial Conduct Authority. The registered office of UBS Asset Management is 21 Lombard Street, London, EC3V 9AH.

UBS ETF Research Reports Latest insights into current ETF investment topics

This series aims to provide investors with insights into current investment topics and discuss how these can be accessed and implemented through ETFs.

On Track Research - 2019

 

February 2019: MDB Bonds – a sustainable alternative to sovereign debt

With the sustainable and impact investing movement gathering pace, we examine Multilateral Development Banks bonds as a potential component within investor bond portfolios. They make a compelling case for inclusion as a top-rated and well diversified investment that has a real impact on people's lives.

On Track Research - 2018

July 2018: The merits of multi-factor investing

Multi-factor exposures tend to deliver return enhancement, whilst limiting the drawdowns and inherent cyclicality associated with single factors. Indexed multi-factor portfolios have successfully delivered excess returns vis-à-vis market cap-weighted portfolios over the long term (historical back-tests), as well as the more recent live track period.

Previous ETF Market Matters publications - 2017

August 2017: Indexing 360°: Multi-Factor Investing

With the growing popularity of smart-beta investing and the many new solutions available on the market, potential buyers are considering ways to add these to their portfolios. One approach is to invest in single factors such as value, quality, dividend, low volatility etc., all of which are now available via passive vehicles including ETFs.

July 2017: Indexing 360°: Choosing the right alternative beta index

The choice for an investor in the passive space is two dimensional. First, an investor has to decide on the right benchmark from a wide array of opportunities, which include market cap-weighted, sector, smart-beta, SRI, theme and other indices, not to mention those with embedded currency hedged overlays. These provide good flexibility as building blocks for passive as well as active portfolio management.

June 2017: Indexing 360°: MSCI EMU vs EURO STOXX 50

Passive investing has developed as a convenient, liquid, and cost-efficient way to invest in flagship indices covering broad markets (e.g., S&P500) and blue chip stocks (e.g., Dow Jones 30). They constitute the core of passive portfolios and provide investors with the equity risk premium for bearing (undiversifiable) market risk. Investors have ample access to these exposures via ETFs, index funds, mandates, and other passive vehicles.

April 2017: Inflation protection in a rising rate environment

Treasury inflation-protected securities (TIPS) are treasury bonds that have their notional value adjusted in line with realized inflation. They are therefore a convenient solution for investors seeking to preserve real purchasing power. Currently, 10-year TIPS are priced such that they will outperform nominal Treasuries if the realized inflation over the next 10 years exceeds on average 2.0% per annum.

January 2017: Lower for Longer: What if inflation bounces higher?

Over the past years a number of economic events including, amongst others, the Financial Crisis of 2007-2008, the European Sovereign Debt Crisis of 2011-2012, through to the recent Oil Price Drop in 2015, have led inflation expectations to low levels. Despite massive monetary stimuli, inflation figures have generally remained low with little indication of rising attempts.

Previous ETF Market Matters publications - 2016

The current fixed income environment is challenging. Yields on core fixed income benchmarks are near historical lows, yet interest rate risk has increased. For example, the Barclays Global Aggregate bond portfolio has seen its yield decline from around 9% at the beginning of the 1990s to just above 1% currently.

The premise of factor investing, also known as smart beta or alternative beta ETFs, is that stocks with certain characteristics known as ‘factors’ outperform the market in the long term. The most common factors include Value, Size, Momentum, Dividend Yield, Quality and Low Volatility. Factor ETFs have lately experienced a growth in investors’ interest with the five-year cumulative annual growth rate in invested assets of more than 30%.

For decades, the investment paradigm for many investors centered on constructing core equity-bond portfolios to meet return objectives. In the past, the equity component would regularly have provided healthy returns (often double digit), while bonds were expected to provide diversification benefits and thus reduce portfolio downside risk in times of distress. Given that there is limited room (if any?) for further interest rate reductions, investors face a very challenging environment in the fixed income space. This has forced investors to search for yield beyond advanced economies and high quality credit.

The past two decades have witnessed an extraordinary decline in interest rates across major advanced economies. More recently, the financial crisis and the European sovereign crisis have prompted central banks to undertake far reaching quantitative easing (QE) policies that have brought down yields to new historical lows. In the “lower for longer” scenario, investors are likely to benefit from a multi-asset allocation approach while searching for yield beyond traditional benchmarks. We show that alternatives and smart beta strategies could add value.

Gold has experienced its second best half-year rally in more than 25 years, outperforming major stock and bond indices in a challenging market environment. Against the backdrop of increased uncertainty, gold is considered a good option to diversify risk in portfolios.

Previous ETF Market Matters publications - 2015

CHF bonds and passive opportunities

The Swiss Confederation has substantially reduced the issuance of new debt in recent months with volumes turning net negative, for the first time since 2012. It will be also conservative when issuing in the second half of 2015. For investors seeking CHF-denominated fixed income investments this move implies they should consider bonds from other issuers (domestic or foreign), or papers listed in the secondary market. While volumes of domestic non-government issuers have soared, foreign issuers have repaid more than they have issued, reducing their total outstanding CHF-denominated debt.

In light of this scenario, two options based on indexed- investments are discussed: Mortgage Bond Institutions (performance captured by the SBI® Domestic Swiss Pfandbrief Index) and Investment Grade Foreign Issuers (SBI® Foreign AAA-BBB Index). Both investments offer a modest yield pick-up over government bonds and both have outperformed the risk free benchmark (SBI® Domestic Government) in recent years.

Equity Benchmarks, Half-Year Review

During 1H-2015, global equity markets experienced mixed performance due to a variety of factors. Local markets responded differently to monetary policies and economic growth prospects. This review looks into the equity benchmarks as of 30 June 2015 (excluding the China turmoil of the few last days). The focus is on one family of indices. The analysis is carried out for one currency, the US dollar, and covers developed as well as emerging markets. In addition, particular attention is placed on Eurozone equities.

  • The year-to-date performance is related to long-term return, which allows one to spot some outliers and inliers. Similarly, the study looks into basic valuation ratios.
  • Overall, developed equities have performed better than emerging equities (with some exceptions like China or Russia).
  •  Within Eurozone equities, we look into several indices covering style investing, sector exposure and small-caps.

Grexit (lessons from past stress events)

Should the Greek government fail to reach an agreement with its creditors and international partners during the meetings scheduled for the coming days, a further intensification in the crisis seems likely. The economic exposure to Greece amongst Eurozone corporates appears very modest. This suggests limited impact (in the long-run) for the ongoing Eurozone recovery, should a Grexit turn as the outcome. This, however, does not rule out potential of a short-term shock.

  • We study behaviour of key equity, government and currency benchmarks in view of past stress events. A cross-asset study looks into what one may expect under different stress scenarios.
  • Europe-concentrated equity exposure implies a weak hedge for Grexit-associated tail risk. Gold (and CHF), as well as short-duration risk free fixed income appear to perform well shortly following stress events, and de-correlate from equity

EUR and USD Credit Spreads: Aggregate vs. Investible Exposures

The divergence in EUR and USD credit spreads has been one of the key topics in bond markets over recent weeks. Figure 1 shows the credit spreads (incremental yields over the benchmark risk free government issues) for EUR- and USD-denominated investment grade (IG) aggregate corporate exposures, highlighting indeed a recent period of divergence. In this study:

  • We compare investment grade corporate aggregates and see that USD spreads have been widening since July '14 and drifting away from EUR spreads, which levelled off. We point out common arguments behind divergence.
  • We attribute spreads to sectors and maturities. Furthermore, we investigate two investible corporate exposures, rather than the aggregates, and demonstrate that liquidity clearly matters. 
  •  As default risk only accounts for part of the credit spread, the non-default component is strongly related to bond liquidity. Investors looking for credit risk premium only should focus on liquid indices that 'remove' the liquidity premium. We discuss two options based on Barclays Liquid Corporate Indices.

Eurozone Small Caps

This study follows on from previous Market Matters, looking into Eurozone equities. Particular attention is given to small caps:

  • Global small cap investors were historically compensated excess risk-adjusted return of 0.22% p.a., the so-called "small-cap premium".
  • Eurozone small caps historically delivered the highest risk-adjusted return, in relation to standard exposure.
  • Within Eurozone equity indices, the MSCI EMU Small Cap Index currently features the highest earnings growth.
  • The more cyclical nature of small caps benefits from an ongoing improvement in the economic environment in the Eurozone. 

Eurozone Equities: Index Strategies Revisited

Equities with the European exposure have attracted most of the inflows into the European-domiciled Exchange Traded Funds (ETFs) in January 2015 (Source: ETFGI monthly report), making up nearly USD 7bn out of 9bn in overall inflows. Following on from these flows, this study looks into Eurozone equities from a exposure perspective representing a suite of investible strategies. Specifically, we compare standard Eurozone exposure (EMU Index which captures large- and mid-caps weighted according to market capitalisation and which reflects the market portfolio) against alternative exposures:

  • large cap and small cap
  • value stocks and growth stocks
  • cyclical sectors and defensive sectors

The major findings can be summarized as follows:

  • Empirical findings indicate a consistent size premium, fading value premium (with a sign of rebound) and a need for sector rotation.
  • For foreign investors with non-EUR funding currency, currency hedging proves critical in periods of high volatility in exchanges rates.

ECB's QE- any yield left?

On January 22nd, the Governing Council of the European Central Bank's (ECB) presented the details of the expanded asset purchase programme (Quantitative Easing, QE). The ECB will buy government bonds (on the yield curve, up to 30 years) in the secondary market, and the purchases of securities will be based on the National Central Banks’ shares in the ECB’s capital key. The prospective implication is that investors will likely get "crowded out" from the sovereign market, leading to a continued appetite for corporate credit.

This market matters presents the current yield landscape based on EUR-denominated fixed income benchmarks, and focuses on the investment-grade credit segments:

  • The only "yielding papers" of the Eurozone sovereign issuers are long-term (10+ or so).
  • The incremental yield can be 'sourced from' EUR corporate bonds, in particular if an issuer is a non-Eurozone corporate.

Previous ETF Market Matters publications - 2014

Dividend-focused strategies attempt to buy high-quality dividend-paying companies at competitive prices. Such a strategy can be also indexed, i.e. placed into rules-based framework which creates an investible index holding the best stocks in view of pre-defined, dividend-focused eligibility criteria.

Such a dividend strategy weights selected stocks according to their dividend yields, i.e. higher yielders receive a higher allocation, with the intention of harvesting dividends. For example, the Dow Jones Global Select Dividend index measures price and yield performance of 100 leading dividend-paying companies worldwide. This strategy delivers a two-fold higher yield than the aggregate as shown in Figure 1.

Dividend Harvesting Indexed Strategy

Eurozone economic growth and the recovery in earnings remain modest. Given that investors have formulated different views and forecasts on this recovery, it is worth considering a sector allocation approach, in view of its sensitivity to the economic cycles.

This study discusses the features of the MSCI Cyclical and Defensive Sectors Indices, covering Eurozone exposure. A key focus are capped indices with an equal allocation to sectors - within cyclical or defensive exposure - ruling out over-concentration. The historical performance shown on Figure 1, highlights mean-reversion feature of the 'spread' between cyclical and defensive sectors, providing investors with an option to rotate between exposures.

Relative performance: MSCI EMU Defensive vs. MSCI EMU Cyclical

While standard market capitalisation-weighted indices represent the market return, some of you may seek exposure to global equities at lower risk (or volatility) compared to the standard benchmark. This newsletter discusses the features of a few risk-adapted strategies offered through MSCI investible indices, ranging from tilting towards low volatility stocks (Risk Weighted), minimizing total risk (Minimum Volatility) and targeting total risk (Risk Control). These strategies provide access to broad equity with a lower long-term risk than the standard cap-weighted benchmark. The Risk Weighted index-based strategy performed best over analysed period, whilst the Minimum Volatility index-based strategy featured the lowest realized risk.

On Thursday September 4th, the ECB surprised global investors by announcing another set of monetary policy easing measures aimed at staving off EMU deflationary trends and at stimulating economic recovery. Global investors also await the results of the Scottish independence vote of September 18th, the outcome of which may have financial implications on international markets. These two events have ignited currency volatility as seen in the chart below.

Controlling the Risk of Currency Volatility in an International Equity Portfolio

Source: Bloomberg, UBS Asset Management, as of 11 September 2014

For investors interested in pure international equity exposure, increased currency volatility implies (undesired) volatility noise, as it provides no explicit return, such as dividend, earnings growth or capital appreciation. Currency movements can be dynamic and investors need to develop their own currency risk management policy and tools to suit their investment objectives. This report presents a possible solution to constructing a global equity exposure achievable by aggregating regional currency hedged ETF building blocks. 

In addition to conventional financial criteria, Socially Responsible Investing (SRI) takes into account social aspects of an investment. Given that corporate and social responsibility can potentially impact profitability and the cost structure of companies, it is worth comparing fundamental data and the risk-adjusted performance of SRI portfolios vs. their respective benchmarks. This brief study focuses on the investible SRI indices within the MSCI family, and concludes: 

  • MSCI's major SRI indices have outperformed their conventional parent indices in risk-adjusted terms
  • MSCI SRI portfolios generally have higher price-to-book value ratios, similar dividend yields, and lower trailing earnings, when compared to their respective parent indices. 
  • Additional investment returns, on top of that delivered by conventional portfolios, shows investors are willing to pay a premium for a positive social tilt achieved with the SRI approach.

For some investors, growth stocks appeal to their desire for high earnings potential, while value stocks featuring above-average dividend yields and low price-to-book ratios typically attract those hunting for a bargain. This report examines these two equity styles from an investible index viewpoint, and concludes:

  • As a result of above-average dividend income, value stocks have delivered superior total return over standard portfolio and growth stocks (both in USA and EMU) in recent years.
  • Given similar earnings levels, the dividend yield differential proves to be a key factor for a superior total return of the USA Value index over its USA Growth counterpart.
  • Assuming a Eurozone recovery, current low earning levels may give a base effect for earnings growth that will favour the EMU Growth index over the EMU Value index.

On the 5th of June, the ECB announced a monetary policy action to provide further stimulus for the Eurozone economy and to mitigate the material risk of deflation. The key measures include a negative deposit rate and a package of up to €400bn of cheap funding for Eurozone banks in an attempt to boost lending on the condition that it will be lent non-financial sector companies (and not for mortgages). This report looks into the EMU equities and fixed income performance, as compared to other benchmarks and in the context of the announced policy action. EMU equities appear to be catching up with global benchmarks after the underperformance experienced in 2011-2012. Sovereign bond yields show substantial differentiation across EMU members, but the premium demanded by investors to compensate them for the credit risk of investing in Spanish or Italian debt is reverting back to the levels of the German or French issues. 

We are delighted to introduce our research series entitled "UBS ETF Market Matters" for The Netherlands. This series aims to provide investors with some insights into current investment topics and discuss how these can be accessed through ETFs. This edition analyzes EUR and USD credit spreads in detail.

The divergence in EUR and USD credit spreads has been one of the key topics in bond markets over recent weeks. Figure 1 shows the credit spreads (incremental yields over the benchmark risk free government issues) for EUR- and USD-denominated investment grade (IG) aggregate corporate exposures, highlighting indeed a recent period of divergence. In this study:

  • We compare investment grade corporate aggregates and see that USD spreads have been widening since July '14 and drifting away from EUR spreads, which levelled off. We point out common arguments behind divergence.
  • We attribute spreads to sectors and maturities. Furthermore, we investigate two investible corporate exposures, rather than the aggregates, and demonstrate that liquidity clearly matters.
  • As default risk only accounts for part of the credit spread, the non-default component is strongly related to bond liquidity. Investors looking for credit risk premium only should focus on liquid indices that 'remove' the liquidity premium. We discuss two options based on Barclays Liquid Corporate Indices.