UBP has increased the defensiveness of its portfolios, adding government bonds and replacing direct equity exposure with hedge funds and convertible bonds.
According to the bank, market volatility is the driving force behind the recent change. ‘While we stay positive on global economic growth and corporate earnings, the recent volatility has implicated a focus on risk management of our portfolios.’
On the fixed income side, the bank said it has moved from an underweight to a small overweight in US dollar and GB pound portfolios. The underweight in government bonds in these portfolios was also further reduced.
In terms of equities, UBP remains underweight in the face of a potential trade war. It said: ‘Given he rising risk of direct confrontation between trading partners, we remain underweight equities and prefer capturing some of the equity risk premium through alternatives.’
UBP also said it maintains a modest position in gold, is optimistic on EM debt, and is underweight credit, preferring alternative strategies such as CAT bonds and merger arbitrage.