"UBS Shares Its Strategy for Its Wealthiest Clients"
From Barron's Penta:
Mark Haefele, the soft-spoken global chief investment officer at UBS wealth management, tells Penta
that there is “still room for markets to improve,” but, at this point
in time, he is advising wealthy clients in particular to invest in
“longer-term trends.” There is a lot of sophisticated analysis packed
into Haefele’s seemingly innocuous remark.
Today, wealthy families have a competitive advantage over all other
investors, public and private: They alone can and do invest for the
long term. Haefele and his research team point out that, at a time when
low capital costs should be spurring major infrastructure investment on
the part of governments and corporations, the opposite is in fact
happening.
Public investment in the U.S., as a share of gross domestic product,
is at its lowest level since 1947. It’s the same in developed countries
across the globe. In the United Kingdom, fixed investment accounts for
its lowest share of GDP since the 1960s. Haefele says the private sector
isn’t investing for the long term either, for many reasons ranging from
corporate tax-code disincentives to the fact that capital costs are
actually high for small- and medium-size companies. As to governments
missing out on historically low borrowing costs to finance multiyear
infrastructure projects that will spur future growth, there’s a reason
for that inertia, as well. Notes his research team:
“Government
borrowing costs are low, but the growth of government revenue is also
low. Governments casting a wary eye at the ‘bond-market vigilantes’ of
financial markets may worry that to raise borrowing at a time of low
income growth will lead to an adverse bond-market reaction.”
But, of course, the imperative to invest in long-term projects and
trends—to meet, say, the needs of an aging population in developed
nations or the basic infrastructure requirements of developing
nations—is as acute as ever. And that, in Haefele’s opinion, is the
opening for ultrahigh-net-worth investors. If you want your portfolio to
have an impact and earn market-beating returns, he says, you need to
be investing in multiyear infrastructure projects that address the real
needs of the future.
Demographic shifts and income inequality are trends that open up
investment opportunities for the patient investor in everything from
drug discovery to education and clean-water infrastructure. But
technology also seems to have Haefele and his team hot and bothered.
IDC, a provider of information-technology market intelligence,
estimates that just five years from now, the global digital universe
will expand to 44 zettabytes. That, to put it in a language or an image
that some of us might understand, is the equivalent of 44 trillion
gigabytes—or a 50-times expansion in just a decade.
The key IT infrastructure needs that Haefele has identified are in
transmission, particularly in emerging markets. A KPMG report claims
that $1 trillion in investment is needed in the next five years simply
to fill the gaps in emerging market telecommunications infrastructure.
If you’re looking for low-cost ideas in this space, consider ETFs such
as iShares S&P Emerging Markets Infrastructure Index fund (ticker: EMIF), PowerShares Emerging Infrastructure Portfolio (PXR), and EGShares Brazil Infrastructure (BRXX)....MORE
