From a trim to its healthcare position to its new energy bets, UBP has revealed the five big portfolio changes it has made for November in its monthly asset allocation publication.
Here’s a closer look:
Favouring non-directional bonds
The Geneva group reduced risk in its credit exposure, moving to underweight investment grade bonds in favour of non-directional bonds exposure.
It continues to be optimistic on the global growth outlook, with fundamentals suggesting that credit spreads could remain tight, it said, and risk-reward in fixed income continuing to lean in favour of reducing risk.
In the allocation review, the group revealed that it clipped its European equity overweight to an underweight position.
This decision was made in order to lock in the gains following the market’s strong recent outperformance.
‘Though the cyclical backdrop remains strong, the recent developments in German and Spain suggest that prospects for further reform in the European Union may be more challenging.’
Taking profits on healthcare
In its equity allocation, UBP cashed in on its healthcare positions, taking profit on the sector.
While the sector has outperformed through all first three quarters of the year, driven by relative multiple expansion, the group was pushed to sell its positions as valuations were approaching ‘fair value’, it said.
According to the group, the valuation call was also accompanied by mixed prospects in the sector’s earnings.
Adding to energy
The asset manager added a new position in the energy sector, it revealed, against a backdrop of robust global growth and stabilising earnings prospects.
With this, relative valuation is attractive, according to UBP. ‘We are seeing balance sheets recovering and cash management improving.’
This is coupled with the expectations of a stabilisation or further rise in the oil price, it explained.
‘We believe the risk-reward is tilted in favour of overweight the sector.’
The last of the allocation changes was made by opening 5.0% US dollar exposure in GBP positions to protect against elevated political and economic uncertainties, ‘related to the current "deadlock" of Brexit negotiations with the EU,’ UBP explained.
‘While not yet our base case, risk of a "hard" Brexit appears to be growing.’