UBS AM reveals its predictions for hot investment trends in 2018

The asset management arm of banking giant UBS has revealed its predictions for the investment landscape in 2018.

Emerging markets should provide opportunities in the year ahead, UBS Asset Management predicted, citing forecasts which suggest earnings growth in these regions will be stronger than at any time since 2010.

Sustainability-focused assets also found favour with UBS AM, as its own research has shown companies with strong governance profiles could outperform their less scrupulous peers by 0.12 per cent per month.

“The asset management industry is changing quickly. Technology and regulation are driving much of the change, but the market environment and the sheer scale of the challenges facing investors will likely increase in intensity in 2018,” said Suni Harford, head of investments at UBS AM.

Smart beta, a strategy which involves tracking indices weighted on a factor other than a company's market capitalisation, will also be on the up, said UBS AM.

They may be able to capture defensive characteristics such as low volatility and quality, and could be an effective means of providing downside protection.

According to UBS AM estimates, more than $450bn of assets globally are tracking alternative beta indices, and FTSE Russell's latest annual survey showed 71 per cent of asset owners worldwide had at least dabbled in the strategy.

UBS AM's Ian Ashment advised that a pragmatic approach would be to invest in a blend of smart beta indices, “capturing both factors that tend to perform well in strong markets or when interest rates are rising, such as value, and factors that tend to provide good downside protection in weaker, more volatile markets, such as low volatility and quality.”

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