UBS's specialized portfolio advisory group has noted a surge in interest in private markets from its affluent clients, leading to an increase in suggested allocations to private equity, debt, real estate, structured products, and hedge funds from 16% to 22%. This shift is significantly influenced by the emergence of perpetual funds that have democratized the market by lowering investment thresholds and providing more withdrawal flexibility.
Despite this growing interest, the majority of investors' portfolios still do not meet the recommended levels. Daniel Scansaroli, head of UBS's CIO Americas office, proposes a 30-30-40 distribution: 30% in private markets (equity, debt, real estate), 30% in public bonds, and 40% in public stocks. This new industry benchmark of 40-30-30 has delivered higher returns over the past 15 years compared to traditional portfolios with a 60-40 stocks-bonds mix,
Investing in private markets requires patience due to the "illiquidity premium," however, UBS reports indicate that U.S. private equity has consistently outperformed the S&P 500 over three-year, five-year, and ten-year periods. Wealthy individuals are encouraged to expand allocations to alternatives by looking at endowments and large single-family offices' investment strategies. Research by the National Association of College and University Business Officers and the UBS Global Family Office Report found similar allocations among endowments and single-family offices.
UBS uses Monte Carlo simulations to forecast potential return outcomes based on market assumptions individual cash needs and risk tolerance. These simulations assist in estimating how much of an investment portfolio should be invested outside of public stocks and bonds. Scansaroli suggests that most clients with a multi-decade investment horizon can tolerate around 30% in alternatives. The rise of perpetual funds has made the creation of a diversified portfolio more manageable, even for clients with $10 million or less, following the model developed for Yale University's private equity portfolio.
InvestingPro Insights
In light of the recent focus on UBS's investment strategies, it's interesting to note the InvestingPro data and tips related to the company. UBS has been a prominent player in the Capital Markets industry and has maintained dividend payments for 12 consecutive years, indicative of its financial stability. This complements the company's aggressive share buyback strategy, which is often seen as a sign of confidence in the business's future prospects.
From a data perspective, UBS's market cap sits at a substantial 75295.18M USD, reflecting its size and influence in the market. The company's P/E ratio is notably low at 2.2, suggesting that it is trading at a low earnings multiple. This could potentially signal an undervalued stock, an aspect that might be of interest to investors.
Lastly, the company's revenue over the last twelve months as of Q2 2023 stands at 33.65B USD, although it's important to note that there has been a decline in revenue growth over the same period.
These insights are just the tip of the iceberg. InvestingPro offers a wealth of additional tips and data for those who want to delve deeper into the financials and investment strategies of companies like UBS.
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