Meeting with the management of Swiss companies provides current insight into the opportunities and challenges faced by the global economy. At the same time, meeting global and regional players, whether they are based in the US, Europe, Asia or elsewhere, provides insight into the competitive environment for Swiss companies. This is why, at UBP, the same team manages Global and Swiss equities, using the same investment approach.
INVESTMENT CASE – SWITZERLAND
- A long-standing record of macroeconomic, political and social stability.
- Not only the largest companies, but also smaller companies include global leaders in industry, pharmaceuticals and consumer goods, many with significant exposure to the growth potential of emerging markets.
- Fifteen Swiss companies are among the Fortune Global 500.
- Swiss equities have delivered considerably higher performance than global equities since 1998 (in CHF terms) with lower volatility than eurozone equities.
- Despite its small size, Switzerland punches above its weight when it comes to the market capitalisation and the quality of the companies it is home to.
- Internationally, only the US, Japan and the UK have higher weightings than Switzerland in the MSCI World Index.
INVESTMENT CASE – GLOBAL
- Companies are increasingly global in scale and transversal in nature rather than limited to specific regions or sectors. Now more than ever, investing in equities requires a worldwide view.
- We believe equities are set to benefit from incremental improvement in global GDP growth, a sustained reduction in the cost of capital, and low commodity prices.
- Opportunities for outperformance come from the divergence between regional growth prospects and policy, and from the differing investment and product cycles across industries, along with stock-specific factors.
Managing Swiss and Global equities is a key expertise at UBP. The team, which has been with UBP since 2006 and now has over CHF 2 billion in assets under management, boasts extensive experience and knowledge of the Swiss and Global equity markets through multiple business cycles.
Our key performance drivers
- Focus on undervalued stocks along the company’s CFROI life cycle: bottom-up approach, with conviction built through the in-depth analysis of companies.
- Active tracking error management to reduce relative drawdowns and participate in growth cycles.
- Lipper Fund Awards Europe – Equity Switzerland, Best Fund over 3, 5 and 10 years in 2016, 2015 and 2014.
- FERI EuroRating Awards winner in 2016 and 2011, and in the top five in 2017, 2015, 2014 and 2013.
- Consistently high peer-group rankings.
- Income statements can be misleading and/or manipulated; cash flows are more accurate and more indicative in the long run.
- Cash flow return on investment (CFROI) best reflects the decision-making process of a company’s management and is a consistent indicator of its ability to create value for investors across sectors and countries.
- Corporations tend to follow a similar life cycle of profitability, reflected by their CFROI.
- We seek out undervalued stocks along a company’s CFROI life cycle. We build conviction through in-depth analysis of companies and their environment.
- Active stock-picking is necessary to deliver long-term outperformance for our investors…
- …but it is important to manage the degree of active risk. Active management of portfolio tracking error is part of our approach to portfolio construction and risk.
Our investment process is a four-step process:
1 - Monitoring the Investment Universe
- Stock and theme idea generation
- Company meetings
- Screening of valuation, fundamentals and momentum
2 - Fundamental Research and Stock Selection
- Proprietary company data forecasts
- CFROI-based modeling
- Absolute and relative valuation
- Growth potential and sustainability
3 - Portfolio Construction and Risk Control
- Contribution to risk
- Active management of tracking error
4 - Monitoring and Exit
- Strict sell discipline; company-specific and portfolio factors considered
Stock selection focuses on identifying where companies stand in their cash flow return on investment (CFROI) life cycle and modelling their future progression. We aim to capture three alpha opportunities along this cycle: companies that have higher growth than is understood by the market; companies that can ‘beat the fade’ through high barriers to entry; and those able to reinvent themselves in tough times.
Portfolio construction and risk management are inherently linked: they focus on allocation to the three alpha opportunities according to our assessment of the macroeconomic environment and the specific stock ideas we identify, as well as on managing the portfolio’s overall tracking error.
UBP’s three Swiss and two Global equity funds have consistently delivered compelling risk-adjusted returns.Discover our range of funds