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Swiss & Global Equities

Year-to-date, Swiss and Global equity funds continue to deliver strong absolute and relative performances, ranking in the top quartile versus their peer groups. Despite short-lived sector/style rotations into oversold value names, the ytd performance of the MSCI AC World reached +24% at the end of October. Extending the horizon back two years, global equities delivered +12% following the correction in Q4 2018. The active management approach adopted by the team driven by fundamental analysis and stock selection based on the CFROI lifecycle, provides a diversified exposure to structural quality and growth names without the need to time the market or the style factors. Performance attributions across the franchise over the ytd period and over longer periods show that the majority of alpha was generated by strong stock selection.
Monthly Investment Outlook November 2019

Staying Engaged in Markets but actively Managing Risks
- Equities, bonds, AND gold all moved higher in October highlighting the challenge facing investors in markets.
- The easing in tensions across both the US-China trade war and UK-EU Brexit negotiations has helped restore some risk taking among investors. At the same time, economic optimism continued to fade especially in the face of mixed US economic and consumer data.
- With the US Federal Reserve setting a high bar to raise rates even if the economic data rebounds while staying on the sidelines absent negative surprises, our concern highlighted in last month’s report that investors may face a ‘gap’ between limited monetary policy support and emerging fiscal support has eased modestly.
- Despite this, risk management remains a focus with equities and fixed income volatility having returned to levels seen prior to the August sell-off; the asymmetric approach that has served investor portfolios well over the past year remains valuable going into year-end.
- Indeed, the ‘temporary’ US money market instability has spread well into October and with the Fed in a more reactive mode, the risk of a liquidity scare in markets remains in the near term though would likely be met by more aggressive Fed action as seen in Sep-Oct.
- As a result, a quality hold to maturity bias with a reasonable cash cushion in fixed income portfolios is preferred to weather near-term volatility and capitalize upon opportunities that might arise. We continue to seek opportunities to lengthen US duration to cushion against liquidity scare risks.
- In equities, the 2019 corporate earnings season is repeating the events of previous quarters with conservative expectations going into the reporting season being beaten but overall estimates looking ahead continuing to face downgrades.
- The declines in the HK and China equity markets have presented a tactical opportunity to rotate emerging market and Asia equity exposure in their favour.
- FX has emerged as an important return driver as outlined last month with the US dollar weakening 2% in October. With a weakening US dollar expected in 2020, FX and precious metal opportunities should present important return prospects going into the year end.
Secular Trends Changes in demographics: a broad and long-term opportunity set

Why thematic investing?

Traditional approaches to investing are constantly challenged by leading companies which are by nature innovative and, for most of them, multisectoral. Disruptors can be found in any sector or industry, making the traditional industry classification framework less and less relevant. Disruption is blurring the lines between countries, sectors, and industries. Therefore, looking at the world through a thematic lens allows investment professionals to access the whole spectrum of opportunities. Along with climate change, evolution in consumer spending patterns and disruptive innovation, demographics is one of four trends impacting the global economy and transforming old habits. At UBP, we believe these trends will capture the key shifts affecting global businesses and society over the coming decades, and therefore offer an exciting starting point to identify long-term investment opportunities. However, these four long-term trends are affecting not just the planet, but also the financial markets and those that participate in them. That said, they are often too large and move too quickly for investors to grasp. As traditional classifications become obsolete, many portfolio managers are breaking free from the shackles of traditional, sectordriven and passive investments, and instead adopting theme-based solutions. But how can a themed approach deliver superior investment returns by viewing the future in the light of the secular demographic trends?

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