UBS Asian Consumption Fund -Q3/11

August 2011
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What is the Asian consumption story based on?

  • Quality companies delivering high Return on Capital (ROC) through production of goods and services
  • Changes to government policies creating a benign environment and structural growth stories found through themes such as: The young demographic, urbanisation and cultural change.
  • The changing Asian consumer:
    • Increased opportunities to find jobs, secure higher disposable incomes with a greater propensity to take on debt

Portfolio construction and benchmark

  • Majority of stocks will be Asian local brands
  • Will avoid companies with a material level of exposure to developed markets
    • Do not want to dilute the overall exposure to Asia
  • Customised benchmark - MSCI Asia ex Japan Consumer & Healthcare Sectors Index
    • Investible universe of 6,000-7,000 Stocks
    • Portfolio holdings usually 40-50 stocks
  • Diversification available through a wide number of sub-sectors. These include:
    • Autos, consumer and packaged food, beverages, retail, internet
    • Telecoms, financials, properties (so long as they sell directly to the end consumer)

How do stocks get in or out of the portfolio?

  • Three filters:
    • Quality companies in right market;
    • Due diligence to establish scalability;
    • The right valuation
  • Which sectors are attractive in Spring/Summer 2011?
    • The Indian tobacco market
    • Huge trend moving from hand rolled to filter cigarettes
    • Indian Tobacco (ITC) has a 75% market share and straddles price points, giving it the potential to succeed within a growing market
  • If a holding thesis is violated, any existing holding within the portfolio will be sold
    • This is rare - stock picked tends to be more about valuations
    • Our stock selection models aim to reduce the risk of paying inflated prices for stocks in the event of market euphoria

Process, resources and risk management

  • Global and Asian sector analysts and specialists enable deep understanding of stocks within universe
  • Weekly portfolio construction meetings for committee to check and confirm holding thesis for each stock held within portfolio

Track record and outlook

  • Underweight in Korea hurt in early 2011
    • However, Korea is a momentum-driven market so it can perform well for 4-5 months but then drop off sharply. We believe it has little structural growth potential, with our underweight position in the region having recently proved beneficial
  • Not a substitute for a core Asian equity fund
  • The Fund is a play on the growing and long-term structural change affecting consumer trends within Asia

 


Important Information

Important Information This communication is for IFAs and Professional Clients only. It is not to be distributed to or relied upon by Retail Clients under any circumstances. This communication may not provide a full explanation of all the topics that were discussed. Care has been taken to ensure the accuracy of the content, but no responsibility is accepted for any errors or omissions. Please note that past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up, and are not guaranteed. Investors may not get back the original amount invested. Changes in rates of exchange may cause the value of this investment to fluctuate. Investments in less developed markets may be more volatile than investments in more established markets. The Fund is permitted to and may on occasion hold a limited number of investments. As the annual management fee of the Fund is charged to capital, the potential capital growth of the Fund will be reduced. The Fund is managed in a concentrated manner with the aim to optimise long-term capital appreciation. This interview is a marketing communication. Any market or investment views expressed are not intended to be investment research. This communication has not been prepared in line with the FSA requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. The information contained in this communication should not be considered a recommendation to purchase or sell any particular security and the opinions expressed are those of UBS Global Asset Management and are subject to change without notice. This communication does not create any legal or contractual obligation with UBS Global Asset Management. Information reasonably deemed to be commercially sensitive and obtained from UBS Global Asset Management (UK) Ltd should not be disclosed. We also request that any information obtained from UBS Global Asset Management (UK) Ltd in your possession is destroyed as soon as it is no longer required. UBS Global Asset Management (UK) Ltd is a subsidiary of UBS AG, 21 Lombard Street, London EC3V 9AH. Authorised and regulated by the Financial Services Authority. Telephone calls may be recorded. © UBS 2011. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved. www.ubs.com | 0800 587 2111

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