MEDIA ALERT
7 February 2017
UBS WEALTH MANAGEMENT: TOP FIVE INVESTOR CONCERNS FOR 2017
With uncertainty in the investment landscape showing no let-up in 2017, Caroline Simmons,
Deputy Head UK Chief Investment Office at UBS Wealth Management, addresses the five questions
she is most frequently asked by clients.
To discuss any of these areas in more detail, please do not hesitate to get in touch with the contacts
listed below to arrange a call with Caroline.
Are equities expensive?
With equity market highs proving a headline-hitting phenomenon in early 2017, investors are
increasingly questioning the value of stocks. While markets aren't cheap, nor are they particularly
expensive and valuation is not prohibitive to equity market performance.
UBS Wealth Management is moderate overweight on equities versus fixed income. The equity risk
premium is still above its long run average, rewarding investors well for risk-taking.
How can I generate income?
Dividends are a good option for investors seeking yield. Relative yield on UK equities, at 4%,
remains attractive when priced against bonds as well as other equity markets. Growth in the UK
market is respectable, with double digit earnings growth this year. Whilst all sectors will likely post
growth, commodities could be the strongest driver.
UBS Wealth Management most prefers defensive dividends. These equities offer an attractive yield,
backed by sound fundamentals. They are usually in companies with high exposure to international
areas, across a broad range of sectors.
Why buy bonds?
While bonds are not usually considered as an exciting option, with returns remaining relatively low,
they act as a good diversifier for the periods when equity growth slows. Investors seeking to
increase chances of a higher total return should widen their scope when considering fixed income
options.
UBS Wealth Management recommends US high yield bonds, which offer a yield of 6%, providing
a good total return even against a backdrop of rising interest rates.
What does well when interest rates rise?
With a US rate rise likely this year, investors are seeking asset classes which maintain their ability
to deliver returns. Historically, hedge funds have offered strong relative and also absolute
performance during rate rise cycles.
While UBS Wealth Management doesn’t expect hedge funds to outperform through a whole cycle,
but hedge funds offer the best risk adjusted return of all the asset classes. They are also a good
diversifier when equity and bond correlations rise.
Is anything certain?
Amidst a backdrop of global uncertainty, portfolios can benefit from multi-decade trends, such as
urbanization, an aging global population, and the rise of an affluent middle class in emerging
markets. Such trends are likely to persist whatever the outcome of any election or central bank
decision, and do not depend on the timing of the economic cycle.
UBS Wealth Management believes that by investing in mega trends, investors can access both
financial returns and create a measurable social impact. Opportunities include:
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Education
Emerging market healthcare
Energy efficiency
Caroline Simmons comments, “In a volatile environment, every area of investors’ portfolios is
coming under fresh scrutiny. Political uncertainty is best navigated through diversification and an
appreciation of the opportunities presented by mega trends. However, they shouldn’t be afraid to
pursue risk assets – in light of accelerating growth and inflation, equities and high yield credit can
provide attractive returns.”
ENDS
UBS Wealth Management
UBS is one of the world’s leading financial firms. Protecting and managing wealth is at the heart of
what we do, by providing superior investment advice and solutions for our clients and helping
them to protect their assets in difficult market environments. In the UK and Jersey, UBS has over
850 people across a network of seven local offices delivering a complete wealth management
service, ranging from investment management to wealth and financial planning, including tax
planning and lending.
Media contacts
Headland
Hannah Davis
020 3805 4856
[email protected]
Jessica Vallance
020 3805 4847
[email protected]