Introduction#
UBS has advised investors to consider increasing their exposure to alternative assets as a strategy to manage growing market volatility and geopolitical uncertainties. The bank highlights hedge funds, private markets, and infrastructure as valuable diversifiers for investment portfolios.
Hedge Funds as a Key Option#
According to UBS, hedge funds are particularly appealing in the current climate. They point out that global macro strategies, which involve making investment decisions based on global economic trends, have historically performed well during times of geopolitical tension. These strategies can provide returns similar to stocks but with less risk and smaller losses. UBS also mentions equity market neutral and multi-strategy funds as flexible options that can yield returns whether markets are rising or falling.
Private Markets and Infrastructure#
In the realm of private markets, UBS remains optimistic about private equity, noting an increase in deal activity and favorable conditions for exits. They recommend focusing on value-oriented buyouts and secondaries, which tend to be less affected by fluctuations in specific sectors. Additionally, UBS sees infrastructure and real estate as long-term diversifiers. Infrastructure assets can provide steady income linked to inflation, while real estate returns may rely more on rental income than on increases in property values.
Caution and Risks#
While UBS advocates for the inclusion of alternative assets, they also urge caution. These investments can carry risks such as illiquidity, meaning they may not be easily sold or converted to cash, as well as higher fees and less transparency compared to traditional investments. Investors should carefully consider these factors when diversifying their portfolios.