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View the article online at http://citywire.co.uk/wealth-manager/article/a746540

Performance review: UBS Wealth duo bet on a weaker euro

by Elsa Buchanan on Apr 23, 2014 at 14:11

Over the last 12 months, the UBS Global Balanced model is up 3.6%, compared to its composite benchmark, which rose 2.7%. Over three years the portfolio delivered 5.3% against 6.3% by the composite index. The underperformance is attributed to 2011 when the duo was short duration and underweight gilts, Mulford said.

In the US, which is still favoured, Mulford backs active funds for mid and small-cap exposure, including Findlay Park American and Wells Fargo US All Cap Growth funds.

‘That worked well last year because the mid caps massively outperformed, but it has not worked so well this year because there has been a bit of a sell-off in small and mid caps relative to the S&P 500.’

Exposure to large caps is through an iShares tracker, with plans to roll out an in-house UBS US Equity Tracker fund.

Closer to home, Mulford favours mid-caps as a domestic recovery play. The team’s stock selection includes financial and industrial names IG Group, Beazley and DS Smith.

US high yield and investment grade corporate bonds have also been a ‘big positive’ over 12 months, with Mulford citing the M&G Corporate Bond fund as a performer. The fund is managed by A-rated Richard Woolnough.

The team is neutral duration, which drove performance. ‘The long end has performed well; the short end has already taken the brunt of anticipated rate rises.’

BUY: Eurozone equities

'Supported by loose monetary policy, improving GDP growth and a recovery in profit margins – all of which should translate into higher eurozone corporate earnings in 2014'

HOLD: Emerging market equities

‘Consensus expectation is for emerging market earnings to grow by 10.6% over the next 12 months. We are more cautious, however, and expect around 9%’

SELL: Gold

‘US monetary policy normalisation, a favourable growth-inflation mix in the developed world and fewer tail risks reduces investors’ need for insurance assets, such as gold. We expect the price of gold to drop to $1,250/oz in six months’ time’

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