During an interview with the FOX Business Network’s Maria Bartiromo, UBS Chairman Axel Weber discussed how to allocate capital in the markets.
“At the moment, clients are really sitting on exceptional amounts of cash… In some portfolio’s it’s 20%… Clients have invested in equity much more than in fixed income… In the U.S, that is starting to change. Valuations are already pretty high. We expect some further positive development on the stock markets but European stock markets, we actually think will recover more than U.S. stock markets,” he said.
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Weber is advising his clients to make a shift towards European and Japanese equities.
“They are [European markets] still to some degree priced to a crisis level. There [are] more dynamics coming ahead in Europe -- so Europe will recover at a slower pace than the U.S., but it will recover, and that’s a good sign for the stock markets in Europe -- and monetary policy [and] stimulus adds to driving investors into risky assets -- and that is usually a strong support for the equity markets, not there anymore to the same degree in the U.S., but it really still is there in Japan and Europe.”
He also broke down how to hedge out currencies.
“Whatever you bought, if you don’t hedge it out in an equity investment, you would lose again on the currency front. We’ve seen that in Japan. We’re seeing that on the European side. So, really, if you want to have a currency position you should have an open currency position -- a long Dollar, short Euro or long Dollar, short Yen position. And I think at the moment it is very unclear whether that will continue to go much further.”
He also discussed the company strategy and position.
“Our priorities are unchanged. Our strategy [is] unchanged. We used to allocate two-thirds of our capital to the investment bank and we now only allocate roughly one-third of our capital to the investment bank… In the investment bank, we shifted the focus from being fixed-income rates and credit business, to now being corporate investment banking. So equity, corporate debt, M&A, advisory business -- and those are the areas where we invest.”