Post on 16-Mar-2018
Global Market Outlook and Asset Allocation Views
Marco Rateitschak, CAIA, FRMDirector, Middle East & Sovereigns
For professional investors only
25 March 2010
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Table of Contents
SECTION 1 UBS – Overview
SECTION 2 Global Market Outlook
SECTION 3 Asset Allocation Views
SECTION 4 Implications for the Insurance Industry
SECTION 5 Conclusions
SECTION 6 Appendix
SECTION 1
UBS – Overview
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UBS – A leading financial services firm
UBS
USD 2.2 trillion¹ invested assets
Over 65,000 employees
Wealth Management
Americas
Global Asset Management
InvestmentBank
Wealth Management & Swiss Bank
Note: As at 30 September 20091 Worldwide figures (rounded)
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Invested assets by asset class
Total institutional assetsUSD 334 billion
Total wholesale intermediary assets USD 229 billion
Note: Assets represented are totals for the UBS Global Asset Management division worldwide Source: UBS Global Asset Management1 Alternative includes Alternative and Quantitative Investments, Infrastructure and Private Markets2 Multi asset includes asset allocation, currency and risk management. These are part of Global Investment Solutions
USD 563 billion of invested assets as at 31 December 2009
Equities27%
Fixed income21%
Money market
13%
Multi asset²18%
Real estate7%
Alternative¹14%
Fixed income20%
Money market
28%
Equities22%
Multi asset2
23%
Real estate7%
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Investment capabilities and services
Equities FixedIncome
Alternative & Quantitative Investments
Global RealEstate
Global Investment Solutions
FundServices
Infrastructure and Private Equity
Core/Value
Global
Country & regional
Emerging markets
Specialist
Long/Short
HALO
Growth Investors
Global
Country & regional
Structured Equities
Systematic Alpha
Quantitative Equities
Index & Portfolio Solutions
Global
Country & regional
Sector specific
Emerging markets
High yield
Structured credit
Liquidity/short duration
Indexed
Single manager hedge funds
Multi-manager hedge funds
Quantitative
Infrastructure fund of funds
Private equity fund of funds
Active commodities, multi-manager
Global
Country & regional
Private strategies
Real estate securities
Agriculture
Global
Country & regional
Asset allocation
Currency management
Return & risk targeted
Structured portfolios
Risk management & advisory services
Alternative funds
Investment funds
Direct infrastructure investment
Global & regional
Note: As at December 2009
Full range of asset strategies
SECTION 2
Global Market Outlook
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US-I
Markets have shown clear signs of stabilisationFear and distress in the financial markets as measured bydramatic change in two-year swap spreads
0
40
80
120
160
200
Feb00
Aug00
Feb01
Aug01
Feb02
Aug02
Feb03
Aug03
Feb04
Aug04
Feb05
Aug05
Feb06
Aug06
Feb07
Aug07
Feb08
Aug08
Feb09
Aug09
Feb10
Sp
rea
d (
bp
s)
2-Year Swap Spreads
Source: Barclays Capital Live, As of February 28, 2010.
2-year Swap spreads, in basis points
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…which helped drive the initial rally in risk assets
Equities +65% Relief rally Earnings & economic data-beating rally
650
750
850
950
1050
1150
Feb
-09
Ap
r-09
Jun
-09
Au
g-0
9
Oct
-09
Dec
-09
S&P 500
650750850950
10501150125013501450
Dec
-07
Ap
r-08
Au
g-0
8
Dec
-08
Ap
r-09
Au
g-0
9
S&P 500
The two stages of the equity rally
Source: UBS Global Asset Management, Datastream, 31 December 20091 S&P 500 return from 9 March 2009 – 31 December 2009
US-I
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(2)
0
2
4
6
8
10
Q207
Q407
Q208
Q408
Q209
Q409
Q210
Q410
Q211
Q411
Scenario projections
Economic Forecast – 3 Scenarios1. Baseline scenario: Weak recovery to a lower trend
(10)
(5)
0
5
10
15
Q207
Q407
Q208
Q408
Q209
Q409
Q210
Q410
Q211
Q411
Scenario projections
M4 BRICs
CPI inflation in baseline scenarioHeadline CPI inflation year-on-year, quarterly
Note: The above scenario is one of three scenarios considered by the UBS Global Asset Management Cyclical Market Forum. The information is presented as an illustration of the issues discussed during the Cyclical Market Forum and is not intended to be a forecast.
Source: Bloomberg, IMF, UBS Global Asset Management
GDP growth in baseline scenarioGDP growth quarter-on-quarter p.a.
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(10)
(5)
0
5
10
15
Q207
Q407
Q208
Q408
Q209
Q409
Q210
Q410
Q211
Q411
Scenario projections
Economic Forecast – 3 Scenarios2. Risk Scenario: Policy overshoot leads to higher inflation
Note: The above scenario is one of three scenarios considered by the UBS Global Asset Management Cyclical Market Forum. The information is presented as an illustration of the issues discussed during the Cyclical Market Forum and is not intended to be a forecast.
Source: Bloomberg, IMF, UBS Global Asset Management
M4 BRICs
(2)
0
2
4
6
8
10
Q207
Q407
Q208
Q408
Q209
Q409
Q210
Q410
Q211
Q411
Scenario projections
CPI inflation in risk scenarioHeadline CPI inflation year-on-year, quarterly
GDP growth in risk scenarioGDP growth quarter-on-quarter p.a.
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(10)
(5)
0
5
10
15
Q207
Q407
Q208
Q408
Q209
Q409
Q210
Q410
Q211
Q411
Scenario projections
Economic Forecast – 3 Scenarios3. Outlier Scenario: Double dip recession and a return of deflation risk
GDP growth in outlier scenarioGDP growth quarter-on-quarter p.a.
M4 BRICsNote: The above scenario is one of three scenarios considered by the UBS Global
Asset Management Cyclical Market Forum. The information is presented as an illustration of the issues discussed during the Cyclical Market Forum and is not intended to be a forecast.
Source: Bloomberg, IMF, UBS Global Asset Management
(2)
0
2
4
6
8
10
Q207
Q407
Q208
Q408
Q209
Q409
Q210
Q410
Q211
Q411
Scenario projections
CPI inflation in outlier scenarioHeadline CPI inflation year-on-year, quarterly
US-I
SECTION 3
Asset Allocation Views
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Attractiveness of equity markets
-60
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
70
1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 2010
Pric
e/V
alu
e D
iscr
epan
cy (i
n %
)
Source: UBS Global Asset Management proprietary valuation model. The S&P 500 is a capitalization-weighted index including 500 leading companies in leading industries of the U.S. economy, as compiled by Standard and Poor’s. The MSCI World Ex-US is a capitalization-weighted index of the major stocks of the developed equity markets of the world, excluding the US, as compiled by Morgan Stanley Capital International. The MSCI EME is a capitalization-weighted index of the major stocks of the developing equity markets of the world, as compiled by Morgan Stanley Capital International.Valuation estimates based on normalized earnings and growth rates
Fair value range
Overpriced
Underpriced
Over – and undervaluation31 December 1995 – 28 February 2010
US-I
US Equity = S&P 500
Global (Ex-US) Equity = MSCI World Ex-US
EM Equity = MSCI EME
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Equity market valuations (price/value)28 February 2010
US-I
-14.1
16.9
-23.8-31.3
-18.6-6.5
-16.1
-12.0
-20.3
10.7-21.4
-39.7-25.3
-53.1
-28.8
-16.3
-20.3
30.6
-60 -50 -40 -30 -20 -10 0 10 20 30
World (Developed)
North AmericaUS
Canada
World ex US (Developed)UK
FranceGermany
SwitzerlandJapan
Australia
Emerging MarketsBrazilRussiaIndia
ChinaKorea
Taiwan
Price/value (in %)
Overvalued
Undervalued
Source: UBS Global Asset Management. Based on MSCI indices except US which is based on S&P 500. The price/value discrepancies are in local currency terms. Valuation estimates based on normalized earnings and growth rates.
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-20
-10
0
10
20
30
40
50
Euro
pe
ex U
K
Un
ited
Sta
tes
MSC
I W
orl
d
Au
tral
ia &
NZ
UK
Jap
an
Dev
elo
ped
Asi
a
UB
S G
lob
al A
sset
Man
agem
ent
Alp
has
Wide valuations spreads
Note: Alphas are a measurement of the gap between price/intrinsic value of a stock. Based on MSCI World Index data as at 31 December 2009. Source: UBS Global Asset Management
Fair value
Cheap
Expensive
Average Alpha
◊Average Alpha
◊
MSCI World Index by regionMSCI World Index by sector
Stock picking opportunities
US-I, EMK, 7-13-09
-20
-10
0
10
20
30
40
50
Hea
lth
care
Tele
com
s
Fin
anci
als
Uti
liti
es
Co
nsu
mer
sta
ple
s
MSC
I W
orl
d
Ind
ust
rial
s
Tech
no
log
y
Ener
gy
Co
nsu
mer
dis
cret
ion
ary
Mat
eria
lsUB
S G
lob
al A
sset
Man
agem
ent
spre
ad i
n A
lph
as
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Global bond valuations (price/value)
Source: UBS Global Asset ManagementValuation estimates based on normalized earnings and growth rates
28 February 2010
US-I
2.9
2.8
1.6
1.5
2.1
2.0
3.4
7.3
10.2
0.2
4.5
5.0
3.3
1.7
0.0 2.0 4.0 6.0 8.0 10.0 12.0
World
World (Ex-US)
North America
Canada
US
Europe (Ex-UK)
EMU
Other Europe
Denmark
Sweden
Switzerland
UK
Japan
Australia
Price/value (in %)
Overvalued
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Attractiveness of investment grade bond markets
Source: UBS Global Asset Management proprietary valuation modelValuation estimates based on normalized earnings and growth rates
Over – and undervaluation31 December 1995 – 28 February 2010
US-I
Overpriced
Underpriced
Fair value range
-9
-6
-3
0
3
6
9
1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 2010
Pric
e/V
alu
e D
iscr
epan
cy (i
n %
)
US Bond = CitiGroup Treasury Index
Global (Ex-US) Bond = Citigroup Global (Ex-US) Gov’t Bond
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-500,000
0
500,000
1,000,000
1,500,000
2,000,000
1980 1986 1991 1997 2003 2009
-50,000
0
50,000
100,000
150,000
200,000US net issuance ofdebt (USD m) (LHS)
UK net issuance ofdebt (£m) (RHS)
Sovereign debt How sustainable is the increase in government debt levels and how long will the market absorb new debt at such low yields?
0
20
40
60
80
100
120
140
160
1980 1985 1990 1995 1999 2004 2009 2014
FranceGermanyJapanUnited KingdomUnited States
Source: Annual net bond issuance: Datastream. *UK data to 30/9/09, US data to 31/12/09Net debt (as % of GDP): IMF forecasts for all countries in 2009 and for Japan in 2008
Net debt (as % of GDP)Net bond issuance
US-I
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Attractiveness of non-investment grade bond markets
Source: UBS Global Asset Management proprietary valuation modelValuation estimates based on normalized earnings and growth rates
Over – and undervaluation31 December 1995 – 28 February 2010
US-I
Overpriced
Fair value range
Underpriced
-50
-40
-30
-20
-10
0
10
20
1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 2010
Pric
e/V
alu
e D
iscr
epan
cy (i
n %
)
EM Debt = JP Morgan EMBI Global
US High Yield = Merrill Lynch Master Index
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Asset class and currency valuations (price/value)
Source: UBS Global Asset ManagementValuation estimates based on normalized earnings and growth rates
28 February 2010
US-I
11.2
-1.40.0
9.65.6
13.0
18.713.3
-2.6
0.4
-9.45.0
2.8-20.3
-23.8-16.3
12.9
-40 -30 -20 -10 0 10 20 30
Japanese yenSingapore Dollar
U.S. dollarSwiss Franc
Swedish KronaCanadian dollar
EMU euroAustralian dollar
New Zealand dollarBritish pound
Emerging Market DebtHigh Yield Bonds
Global (ex-U.S.) BondsU.S. Bonds
Emerging Market EquitiesGlobal (ex-U.S.) Equities
U.S. Equities
Price / value (in %)
Overvalued
Undervalued
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Global Securities Portfolio: Current balanced strategy
26.4%
32.3%
9.3%
12.5%
9.5%
0.0%
3.0%
7.0%
27.9%
28.8%
8.3%
15.0%
15.0%
2.0%
3.0%
0.0%
US Equities
Global (Ex-US) Equities
Emerging Markets Equities
US Bonds
Global (Ex-US) Bonds
Emerging Markets Debt
High Yield Bonds
Cash Equivalents
Portfolio Strategy
GSMI Benchmark
The Strategy generally expects to make its active asset allocation based on these asset ranges. The Strategy is actively managed: the Strategy may exceed these asset ranges and modify them in the future. In addition, the Strategy can maintain a cash equivalent level ranging from 0-50% of the Strategy’s asset allocation.1 Note: The Global Securities Markets Index (GSMI) Index is the benchmark for the Global Securities Composite and the Global Allocation Fund. It is an unmanaged index compiled by UBS Global Asset Management. Prior to 30 November 2003, the 40% US equity portion of the benchmark was constructed using the Wilshire 5000 Equity Index. Prior to May 1, 2009, the equity portion of the benchmark was constructed with 40% Russell 3000 Index, 22% MSCI World ex USA (Free) Index, and 3% MSCI Emerging Markets Free Index, and the US and Global fixed income portion was constructed with 21% Citigroup Broad Investment Grade (BIG) Bond Index and 9% Citigroup World Government bond ex-US Index. As of May 1, 2009, the GSMI is as follows: 65% Morgan Stanley All Country World Index, 15% Citigroup World Government bond ex-US Index, 15% Citigroup World Government Bond US Index, 3% Merrill Lynch High Yield Cash Pay Constrained Index, and 2% J.P. Morgan EMBI Global. Benchmark date as of 31 January 2010
US-I (RU), US-P
Global Equities Range0% 90%
Global Bonds & Cash Range10% 100%
Equities strategy positioning vs. internal benchmark
Bonds and cash strategy positioning vs. internal benchmark
Current Allocation
32%
28 February 2010
68%
1
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Market exposure1
28 February 2010
US-I
43.0%
22.4%
0.0%
6.1%
12.7%
-3.0%
0.0%
27.0%
5.0%
0.0%
0.0%
-7.5%
0.0%
4.0%
20.5%
4.8%
32.5%
8.0%
-25% -15% -5% 5% 15% 25% 35% 45% 55% 65%
Total equity
US large cap equity
US small cap equity
UK equity
Europe equity
Japan equity
Emerging market equity
Other developed equity
Total bonds
Investment grade credit
High yield bonds
Emerging market debt
Real return bonds
Sovereign bonds
Global/o ther bonds
Convertible bonds
Real estate
Cash and hedge offsets
ShortLong
Total equity
Total bonds
Cash and hedge offsets
Information is representative of a specific DAS institutional portfolio. Information will vary slightly among the various investment options within the DAS strategy.Supplemental information to the DAS Composite 1 The market exposure results from holdings of physical assets, futures, options and swap positions. Source: UBS Global Asset Management.
Real Estate
Dynamic Alpha Strategies: Current absolute return strategy
SECTION 4
Implications for the Insurance Industry
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A difficult environment for the insurance industry
Conclusion for strategic Asset-Liability Management
Example Europe: Producing attractive investment returns at given risk (capital) levels are key
Efficient use of regulatory and economic capital a must
Strategic management of interest risk a core competence to safeguard targeted returns
Attractive ROIs are key (attract life premiums /avoid lapse risk / retain capital base)
Additional returns can only be justified through suitable risk minimising strategies
2
3
4
1
Cause: market pressure and regulatory changes
Effect: less capacity for risk, yet strong demand for return
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Insurance investment requirements
Insurance P&L and B/S
Risk
Regulatory
Return Local & Solvency Accounting
Full Range of Asset Strategies
Direct
Fund of Fund
Strategy Equities Fixed Income Real Estate Infrastructure Private Equity Hedge Funds
Strategies to exhibit regulatory fit with suitable risk andportfolio correlation
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Economic Risk - Reduce volatility- Asset diversification- Liquidity risk vs yield
Inflation protection- Real assets- Recovery curve- Direct vs indirect hedge
ALM Considerations - Duration- Current yield- Downside protection
Investment topics driven by current client requirements
Current investment themes in the insurance sector
2
4
3
Regulatory Issues - Solvency capital- Stress testing- Duration credit
1
SECTION 5
Conclusions
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Economic Outlook
♦ Global economy is visibly stabilizing and underlying fundamentals are becoming more robust
♦ Improvement in final demand is a necessary condition to avoid a set-back in H2 2010
♦ Markets remain vulnerable to short term shocks and volatility is expected to remain elevated
♦ Investment opportunities, particularly in equity markets remain, but are more selective
♦ Prices which are observed reaching “normal” levels should be interpreted and observed with considerable caution
January 2010 Source: UBS Global Asset Management
Summary views
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Asset Allocation and Currency Summary views
UnattractiveAttractive Neutral
US
Bo
nd
sEq
uit
ies
Cu
rre
nci
es
Emerging
Ex-US
SEK EUR
JPY
USD GBP
Emerging
Sovereign
Note: As of 31 December 2009Based on UBS Global Asset Management views
High Yield
Investment Grade
Source: UBS Global Asset Management, as of December 31, 2009
SECTION 6
Appendix
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UBS Global Asset Management
♦ UBS Global Asset Management is a large scale asset manager with well diversified businesses across regions, capabilities and distribution channels
♦ We provide a wide range of traditional, alternative, real estate, infrastructure and private equity investment capabilities and fund administration services
♦ We have around 3,500 employees, located in 25 countries
♦ Invested assets total some CHF 583 billion (EUR 384 billion, GBP 352 billion, USD 562 billion).
♦ We are one of the world’s leading asset managers, as well as a leading fund house in Europe, the largest mutual fund manager in Switzerland1 and the largest global hedge fund of funds manager2
Overview
Note: As at 30 September 20091 Source: Lipper FundFlows Insight Report (as at 30 September 2009)2 Source: InvestHedge Billion Dollar Club (September 2009)
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Full range of asset strategiesAsset strategy selection supported by industry specific expertise
Insurance Specific Services
Financial Industry Assets (FIA) Global Investment Solutions (GIS)
Full Range of Asset Strategies
Alternatives
Global/ regional/ Emerging
Liability driven
Sector & credit
Cash management
Global/ regional
Private strategies
Agriculture
Real estate Securities
Single / Multi manager
Hedge Funds single & multi manager
Private equity, single & multi manager
Multi-strategy
Quantitative
Direct investments
Single / multi manager
Listed securities
Long/ short
Global/ Regional/ Emerging
Social responsible
Indexed and enhanced ind
Note: As at September 20091 Worldwide figures (rounded)
InfrastructureReal EstateFixed IncomeEquities
♦ CHF 146 billions AuM
♦ Proprietary research (more than 100 analysts) and risk management
♦ Between 14 and 11 years average investment experience across teams
♦ Global infrastructure providing services and local delivery
♦ CHF 239 billions AuM
♦ Buy side credit research 20+ credit analysts
♦ Long standing experience of portfolio managers with over 14 years of investment experience
♦ CHF 35 billions AuM
♦ Investing in real estate for over 65 years
♦ Global platform able to leverage UBS’s large network
♦ Global diversification possible via “ex-home market” investment
♦ Single fund and fund of funds available
♦ UBS infrastructure single fund raised CHF 1.5 billions in 2008
♦ FoF: conservative investment strategy with 5 years track record
♦ Single and fund of hedge funds available
♦ 1st tier HF manager with USD 36 bn AuM
♦ UBS HF 1st quartile performance in 2009
♦ Single and fund of private equity funds available
♦ PE: consistent 1st
quartile track record
Integrated strategiesAsset and liability investment solutions
Investment outsourcing solutions
Global and regional balanced portfolios
Global tactical asset allocation solutions
Dynamic alpha strategies
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FIA: Insurance and asset management expertise
1 Economic Value Added
2 Return on Risk-adjusted capital
InvestmentRationale
1
EconomicRationale
3
AccountingRationale
4
RegulatoryRationale
Liquidity-Rationale
2
5
Local investment restrictionsSolvency capital requirementsRequirements of rating agencies
Classification of assetsManagement of B/S & P&L volatilityConsolidation issues
Impact on EVA1 or RORAC2
Risk management and transferAsset allocation & diversificationDuration of liabilities
Quality of asset manager Track record & performance Portfolio fit
Cash flow profile of assetsLiquidity of assetsRisk & duration of liability book
Applied know how – the key for high level client discussions and best fit offerings
Scope extends beyond traditional AM criteria UBS capabilities
Team of alternative & insurance experts provide suitable products
Products optimized resupervisory and
solvency requirements
Proprietary models:(solvency) capital efficiency
Products optimized retax & accounting treatment
Unique yield and liquidity enhancement
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Schedule of composite performance
The composite's past performance is not necessarily an indication of how it will perform in the future.
UBS Global Asset Management (the Firm) has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®). UBS Global Asset Management has been verified for the periods from January 1, 2002 through December 31, 2007 by Ernst & Young. A copy of the verification report is available upon request.
1. Global Securities Composite - A composite of accounts that are diversified across the equity and fixed income markets of the US and a broad range of other countries. Futures are used to help implement our top down country allocation typically with a negligible net exposure. The benchmark, Global Securities Market Index, is produced internally from generally available indices. It is a blended index incorporating percentages of various indices across all of those capital markets. The percentages may be periodically re-weighted to reflect changing capital market expectations. Prior to March 31, 1984, the Global Securities Composite was a subsector of the UBS Multi-Asset Portfolio Collective Fund (MAP) excluding the following fund holdings: Institutional Venture Capital I, Institutional Venture Capital II, Fund F Real Estate Fund and the UBS US High Yield Bond Collective Fund, and represents the equity holdings and frictional cash of the portfolio.
2. A list of all Firm composites is available upon request. The Firm is defined as all actively and passively managed institutional and retail accounts of UBS Global Asset Management (the Firm). The effective date of the Firm is January 1, 2002. Prior to that, the Firm originally consisted of the following entities: UBS Global Asset Management (Americas) Inc., UBS Global Asset Management Trust Company, UBS Realty Investors LLC & UBS AgriVest LLC. As of 2001, the Firm assets reflect the integration of the investment management platform of UBS Global Asset Management (UK) Ltd and UBS Global Asset Management International Ltd into the existing Firm definition. Each of the entities comprising the Firm definition is an affiliate of UBS AG. Prior to January 1, 1993, certain terminated accounts are not included.
3. Composites consisting of more than one portfolio are asset weighted by beginning-of-period asset values. Investment results are time-weighted performance calculations representing total return. Returns are calculated using geometric linking of monthly returns. Composites are valued at least monthly, taking into account cash flows. All realized and unrealized capital gains and losses, as well as all dividends and interest from investments and cash balances, are included. Interest income from fixed income securities is accrued, and equity dividends are accrued as of the ex-dividend date. Investment transactions are accounted for on a trade date basis. Sources of foreign exchange rates may be different between accounts in the composite as well as the benchmark. The rates of return are presented both net and gross of investment management fees. Gross of fee returns are calculated net of transaction fees and other trading expenses. Net of fee performance reflects the deduction of the highest fee charged, as described in Part II of Form ADV. The highest fee charged for accounts of this type is 0.80% since January 2006, 0.85% from July 1993 to December 2005, 0.70% from January 1989 to June 1993 and 0.60% prior to January 1989. There are additional transaction fees upon entry and exit from the strategy. Due to the graduated nature of fees, as account size increases, the annual percentage fee will decline. Net of fee returns are calculated by geometrically deducting the deannualized highest annual management fee from each monthly gross return and geometrically linking the monthly returns for each period. Additional information regarding the firm’s policies and procedures for calculating and reporting performance returns is available upon request.
4. Results include all actual fee-paying, discretionary client portfolios including those clients no longer with the Firm. Portfolios are included in the composite beginning with the first full month of performance to the present or to the cessation of the client’s relationship with the Firm. Terminated accounts are included through the last full month in which they were fully invested, and no alterations of composites have occurred due to changes in personnel.
5. Composite dispersion represents the consistency of the Firm’s composite performance results with respect to the individual portfolio returns within the composite. Presented is the asset-weighted dispersion (standard deviation) of the portfolios within the composite. Only portfolios in the composite for each full time period are included in the dispersion calculation, and no dispersion is presented for composites consisting of only a single portfolio.
Composite Performance: Global Securities Composite (January 1, 1982 through December 31, 2008) Amounts and returns expressed in USD
Year
Gross Asset- Weighted Return (%)
Benchmark Return (%)
Net Asset- Weighted Return (%)
# of Portfolios End of Period
Total Composite Assets End of Period (millions)
Asset- Weighted Dispersion (%)
Composite Assets as % of Firm Assets Firm Assets (billions)
1982 24.37 16.86 23.64 1 35 NA 0.86 4 1983 18.19 18.43 17.50 1 83 NA 1.63 5 1984 7.90 6.02 7.26 3 133 NA 2.22 6 1985 26.10 32.91 25.36 3 237 0.25 3.31 7 1986 19.66 24.78 18.95 3 233 0.24 0.72 32 1987 14.06 9.92 13.39 3 274 0.01 0.73 37 1988 15.82 15.96 15.14 3 502 0.23 1.23 41 1989 19.20 19.36 18.38 3 780 0.09 1.65 47 1990 4.92 -3.56 4.19 3 942 0.01 1.92 49 1991 23.07 23.97 22.23 3 122 0.13 0.25 50 1992 9.05 4.47 8.30 1 451 NA 0.80 56 1993 12.04 14.46 11.19 2 784 NA 1.41 56 1994 -0.76 1.42 -1.60 3 1,038 0.09 1.47 71 1995 26.03 24.70 24.99 2 1,187 NA 1.44 82 1996 15.25 12.53 14.29 2 2,017 0.47 2.30 88 1997 11.83 14.30 10.90 2 1,843 0.19 1.91 96 1998 9.78 16.45 8.86 4 2,128 0.29 1.97 108 1999 2.69 16.85 1.82 4 1,805 1.20 1.76 103 2000 6.62 -6.11 5.72 2 714 1.10 0.84 85 2001 3.37 -7.50 2.50 1 552 NA 0.47 117 2002 -2.31 -8.27 -3.14 1 661 NA 0.22 305 2003 29.87 26.48 28.80 2 1,037 NA 0.24 431 2004 15.10 12.87 14.13 3 1,736 0.33 0.35 500 2005 7.36 6.51 6.45 5 2,950 0.19 0.54 543 2006 15.02 14.84 14.11 4 3,666 0.20 0.57 642 2007 5.85 8.78 5.01 4 3,884 0.49 0.57 677 2008 -34.83 -26.87 -35.40 3 1,998 0.69 0.43 466 Composite created March 25, 1999. The Report of Independent Accountants, available upon request, is based on procedures performed on the composite from January 1, 1993 through December 31, 2007. Benchmark returns are not covered by the Report of Independent Accountants.
Global Securities Composite
US-I, US-P (RU)
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Schedule of composite performance
The composite's past performance is not necessarily an indication of how it will perform in the future.
UBS Global Asset Management (the Firm) has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®). UBS Global Asset Management has been verified for the periods from January 1, 2002 through December 31, 2007 by Ernst & Young. A copy of the verification report is available upon request.
1. Dynamic Alpha Strategy (6-8% real) Return Objective Composite – A composite of accounts providing integrated asset management across and within capital markets with a total real return objective. The portfolios are actively managed within an
asset allocation framework that encompasses the full range of market, currency, and security exposures within the world capital markets. Derivatives are employed in this strategy to increase or decrease market exposures. Readily available derivative instruments (for example, financial futures, forward agreements, options, swaps, and other instruments) may be used in each market. The benchmark, CPI, is an absolute real return benchmark reflecting the goal of achieving total returns over inflation for the portfolio regardless of market returns.
2. A list of all Firm composites is available upon request. The Firm is defined as all actively and passively managed institutional and retail accounts of UBS Global Asset Management (the Firm). The effective date of the Firm is January 1, 2002. Prior to that, the Firm originally consisted of the following entities: UBS Global Asset Management (Americas) Inc., UBS Global Asset Management Trust Company, UBS Realty Investors LLC & UBS AgriVest LLC. As of 2001, the Firm assets reflect the integration of the investment management platform of UBS Global Asset Management (UK) Ltd and UBS Global Asset Management International Ltd into the existing Firm definition. Each of the entities comprising the Firm definition is an affiliate of UBS AG.
3. Composites consisting of more than one portfolio are asset weighted by beginning-of-period asset values. Investment results are time-weighted performance calculations representing total return. Returns are calculated using geometric linking of monthly returns. Composites are valued at least monthly, taking into account cash flows. All realized and unrealized capital gains and losses, as well as all dividends and interest from investments and cash balances, are included. Interest income from fixed income securities is accrued, and equity dividends are accrued as of the ex-dividend date. Investment transactions are accounted for on a trade date basis. The rates of return are presented both net and gross of investment management fees. Gross of fee returns are calculated net of transaction fees and other trading expenses. Net of fee performance reflects the deduction of the highest fee charged. The highest fee charged for accounts of this type is 0.90% since May 2007, 1.10% from January 2006 to April 2007, and 1.40% prior to January 2006. Due to the graduated nature of fees, as account size increases, the annual percentage fee will decline. Net of fee returns are calculated by geometrically deducting the deannualized highest annual management fee from each monthly gross return and geometrically linking the monthly returns for each period. Additional information regarding the firm’s policies and procedures for calculating and reporting performance returns is available upon request.
4. Results include all actual fee-paying, discretionary client portfolios including those clients no longer with the Firm. Portfolios are included in the composite beginning with the first full month of performance to the present or to the cessation of the client’s relationship with the Firm. Terminated accounts are included through the last full month in which they were fully invested, and no alterations of composites have occurred due to changes in personnel.
5. Composite dispersion represents the consistency of the Firm’s composite performance results with respect to the individual portfolio returns within the composite. Presented is the asset-weighted dispersion (standard deviation) of the portfolios within the composite. Only portfolios in the composite for each full time period are included in the dispersion calculation, and no dispersion is presented for composites consisting of only a single portfolio.
6. The composite assets at 12/31/2003 and 12/31/2004 are represented by one account that is non-fee-paying.
Dynamic Alpha Strategy (6-8% real) Return Objective Composite (December 1, 2003 through December 31, 2008) Amounts and returns expressed in USD
Year
Gross Asset-Weighted Return (%)
Benchmark Return (%)
Net Asset-Weighted Return (%)
# of Portfolios End of Period
Total Composite Assets End of Period (millions)
Asset-Weighted Dispersion (%)
Composite Assets as % of Firm Assets
Firm Assets USD (billions)
2003* 3.01 -0.11 2.90 1 43 NA 0.01 431
2004 10.98 3.26 9.45 1 48 NA 0.01 500
2005 9.56 3.42 8.05 2 2,015 NA 0.37 543
2006 8.48 2.54 7.30 2 4,241 0.04 0.66 642
2007 -2.64 4.08 -3.58 4 3,898 0.58 0.58 677
2008 -20.57 0.09 -21.29 5 2,161 1.87 0.46 466
* Performance presented for December 2003. No statistics are annualized. Composite created November 30, 2003. The Report of Independent Accountants, available upon request, is based on procedures performed on the composite from December 1, 2003 through December 31, 2007. Benchmark returns are not covered by the Report of Independent Accountants.
US-I, US-P (RU)
Dynamic Alpha Strategy Composite
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Disclaimer
US-I
For marketing and information purposes by UBS. For professional investors only. This document has been issued by UBS AG, a company registered under the Laws of Switzerland. This document is for distribution only under such circumstances as may be permitted by applicable law. It was written without reference to any specific or future investment objective, financial or tax situation or requirement on the part of a particular individual or group. The document is for information purposes only and is not intended to be construed as a solicitation or an invitation to make an offer, to conclude a contract, or to buy or sell any securities or related financial instruments. The products or securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. The information and opinions contained in this document have been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith, but is not guaranteed as being accurate, nor is it a complete statement or summary of the securities, markets or developments referred to in the document. The details and opinions contained in this document are provided by UBS without any guarantee or warranty and are for the recipient's personal use and information purposes only. Past performance of investments (whether simulated or actual) is not necessarily an indicator of future results.
The performance shown does not take account of any commissions and costs charged when subscribing to and redeeming units. Commissions and costs have a negative impact on performance. Should the currency of a financial product or service not match your reference currency, performance may rise or fall due to currency fluctuations. All such information and opinions are subject to change without notice. UBS AG and / or other members of the UBS Group may have a position in and may make a purchase and / or sale of any of the securities or other financial instruments mentioned in this document. This document may not be reproduced, redistributed or republished for any purpose without the written permission of UBS AG. This document contains statements that constitute “forward-looking statements”, including, but not limited to, statements relating to our future business development. While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. Source for all data and charts (if not indicated otherwise): UBS Global Asset Management.
© UBS 2010. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved
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Contact information
UBS AGGlobal Asset ManagementGessnerallee 3CH-8098 Zürich
Marco Rateitschak, CAIA, FRMDirectorMiddle East & Sovereigns
Tel: +41-22-375 95 12Fax: +41-44-235 20 46marco.rateitschak@ubs.com