1

netwealth educational webinar series

October 15, 2015

Strategies for a constantly changing market

Presented by Tracey McNaughton, UBS

Q3 2015

ConfidentialGlobal Asset Management

Tracey McNaughton

Head of Investment Strategy, Australia

Economic and Market Outlook

Ch-ch-ch-changes

3

This slide relates to UBS Balanced Investment Fund, UBS Defensive Investment Fund and UBS Tactical Beta Funds, * Indicates UBS Tactical Beta Fund position only

Source: UBS Global Asset Management.

As at 31 August 2015

Modest global growth

– Fed to raise rates in 2015

– ECB and BOJ continue unconventional monetary policy

– Uncertainty around Greece subsided

– Stably slowing China but supported by stimulus measures

Globally fair value to cheap

– Overweight equities – with a preference outside of North America

– Overweight Japanese equities vs US equities

– Overweight German equities vs Swedish equities

– In EM, favour North Asia on an intra-market basis

– Overweight Netherland equities vs UK equities

– Overweight US Russell 2000 equities vs S&P500 equities

Positioning

– Low duration risk

– Preference for Australian sovereign

– Preference for IG given positive carry characteristics

Positioning

– Largest overweight positions are in USD, PHP, EUR & MXN. Largest underweight positions are in CHF & NZD* and

MYR*

Positioning: Near-term cautious

Macro

Equities

Bonds

FX

Now what?– Volatility to stay

Source: UBS, Bloomberg

4

US

Rates lift off Dec;

tightening cycle slow

& shallow

2015: 2.3%

2016: 2.7%

EU

Growth improving,

deflation risk easing;

geopolitical risk

2015: 1.8%

2016: 2.0%

China

7% target growth,

inflation low, room to

ease policy further

2015: 6.9%

2016: 6.7%

Japan

Growth helped by

weak yen, inflation

falling

2015: 0.8%

2016: 1.4%

AU

Mining inv down,

exports and housing

strong, unemp falling

2015: 2.5%

2016: 2.9%

UK

Growth driven by

consumption &

investment; rates

steady until early-16

2015: 2.6%

2016: 2.4%

5

Global reflation - central bank policy easing

50 central bank rate cuts thus far in 2015 (some more than once) and many

unexpected

Uzbekistan

Romania

India Egypt

Peru

Turkey

Canada

Eurozone

Pakistan

Singapore

AlbaniaRussia

Australia

China

Switzerland

Denmark

Sweden

Indonesia

Botswana

Israel

China

India

Australia

Poland

South Korea

Serbia

Thailand

NZ

South

KoreaCanada

Australia

China

6

Global reflation

Other central banks are picking up where the Federal Reserve left off

Change in weighted average of central bank interest rates

since August 2007 (2013 current USD GDP weights)

Source: Bloomberg Finance LP, IMF, UBS Global Asset Management

Note: Excluded countries are Russia, Brazil, Venezuela and Nigeria

Change in M1 money supply as % GDP since August 2007

Source: ThomsonReuters DataStream, IMF, UBS Global Asset Management

-2

0

2

4

6

8

10

12

14

16

2007 2008 2009 2010 2011 2012 2013 2014 2015

DM EM World

-5

-4

-3

-2

-1

0

1

2007 2008 2009 2010 2011 2012 2013 2014 2015

DMEMEMex Rus, Bra, Ven, Nig

7

Asset prices experiencing equity reversal

The drop in equities is coinciding, but harshest in China

Yield on 10-year government bonds, %

Source: Thomson Reuters DataStream

Equity market indices relative to pre-crisis peak

Source: Thomson Reuters DataStream

8

Oil prices remain weak

Creates clear winners and losers, and the losers are concentrated

Net oil exports as % of GDP, 2013

Source: ThomsonReuters DataStream, UBS Global Asset Management

-20

-10

0

10

20

30

40

50

60

70

Sin

gapore

Ukra

ine

Mo

rocco

Tha

iland

South

Kore

aH

ung

ary

Ho

ng

Ko

ng

Slo

vakia

Ch

ileS

loven

iaIn

dia

So

uth

Afr

ica

Cze

ch

Rep

ub

licJa

pan

Be

lgiu

mP

hili

ppin

es

Sp

ain

Ge

rma

ny

Po

rtu

gal

Gre

ece

Au

str

iaIr

ela

nd

Ita

lyP

ola

nd

Fra

nce

Ne

w Z

ea

land

Fin

land

Ch

ina

Sw

itze

rla

nd

Sw

ede

nT

urk

ey

US

Indo

ne

sia

Arg

entin

aB

razil

Ne

therla

nd

sA

ustr

alia UK

Eg

ypt

Pe

ruD

enm

ark

Me

xic

oC

an

ad

aG

han

aM

ala

ysia

Co

lom

bia

Ecu

ado

rN

igeria

Ira

nR

ussia

No

rway

Ka

zakh

sta

nA

lgeria

Aze

rbaija

nU

AE

Ve

ne

zu

ela

Ira

qS

aud

i A

rabia

Om

an

An

go

laQ

ata

rK

uw

ait

US-I

9

Less financial system leverage = less growth

8

10

12

14

16

18

20

22

2006 2007 2008 2009 2010 2011 2012 2013 2014

*Average of Citibank, BankAmerica, JPMorgan, Morgan Stanley, Goldman Sachs, Citi

Source: Citibank, BofA, Morgan Stanley, Goldman Sachs, Citi

Average Bank Assets over Equity Ratio*

Lower leverage may increase frequency of events but reduce severity of

movements

Lost in transition

Australia

11Source: Bloomberg, ABS, UBS

Brother, can you spare a dime?

-2

-1

0

1

2

3

4

5

6

7

90 92 93 95 96 98 99 01 02 04 05 07 08 10 11 13 14

%

Australian GDP

QoQ YoY

7

8

9

10

11

12

13

14

88 90 92 94 96 98 00 02 04 06 08 10 12 14

Th

ou

san

ds

Real net national disposable income/capita

2

2.5

3

3.5

4

4.5

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Wage Cost Index(yoy%)

1990: Recession we had to have

2002: Resources-led

China boom starts

2008: GFC

12

Source: Bloomberg, ABS, UBS

Weaker dollar is helping to rebalance the economy

50

70

90

110

130

150

170

Dec-11 Aug-12 Apr-13 Dec-13 Aug-14 Apr-15

Iron ore ($US)

0.6

0.7

0.8

0.9

1

1.1

07 08 09 10 11 12 13 14 15

AUD/USD Exchange rate

-62%

-35%

13Source: Bloomberg, ABS, UBS

Business conditions – responding to weaker AUD

-20

-15

-10

-5

0

5

10

15

20

25

00 01 02 04 05 06 08 09 10 12 13 14

NAB Business Conditions Index

From producer to consumer

China

China – growth and inflation easing

Source: Bloomberg, UBS,15

0

2

4

6

8

10

12

14

16

79 84 89 94 99 04 09 14

China: Real GDP(yoy%)

-4

-2

0

2

4

6

8

10

08 09 10 11 12 13 14 15

Consumer Price Index (yoy%)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

05 06 07 08 09 10 11 12 13 14 15

China Li Ke Qiang Index (composite electricity output, rail freight and loan growth)

China – financial conditions tight

Source: Bloomberg, UBS16

50

60

70

80

90

100

110

120

130

140

150

04 05 06 07 08 09 10 11 12 13 14 15

China Monetary Conditions Index(composire of real eff exchange rate, loan growth, real interest rate)

Looser

Tighter

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

China Foreign Reserves ($tn)

17

Real effective exchange rates %

Deviations from 10-year average – CNY significantly overvalued

Source: UBS estimates, Haver

-30%

-20%

-10%

0%

10%

20%

30%

CN

Y

PH

P

CH

F

SG

D

ILS

US

D

TH

B

GB

P

PE

N

KR

W

TW

D

NZ

D

MY

R

IDR

AU

D

CL

P

INR

RO

N

PLN

CZ

K

SE

K

TR

Y

HU

F

MX

N

CA

D

RU

B

EU

R

NO

K

BR

L

ZA

R

CO

P

JP

Y

18

Property prices stabilising; equities not so much

Source: Bloomberg, National Bureau of Statistics, China

0

1,000

2,000

3,000

4,000

5,000

6,000

02 03 04 05 06 07 08 09 10 11 12 13 14 15

China A shares

-8

-6

-4

-2

0

2

4

6

8

10

12

05 06 08 09 10 11 13 14 15

House prices (yoy%)

From deflation to inflation

Japan

20

Japanese confidence

Weak JPY makes large firms happy, but small firms and households are still

cautiousNormalised confidence surveys in Japan, standard deviations from the mean

Source: Bank of Japan, Shoko Chukin Bank, Cabinet Office (Japan), UBS Global Asset Management

2121

Japanese QE driving weaker yen

The scale of quantitative easing should not be underestimated

Central bank balance sheets as % of GDP, cumulative

change since Q3 2007

Source: National central banks, IMF, UBS Global Asset Management, data through 4 Nov 2014. Note: ECB projection assumes an addition EUR 1 trillion added to the balance sheet

0

10

20

30

40

50

60

70

80

90

2007 2009 2011 2013 2015 2017

USA Eurozone Japan

US-I

75

85

95

105

115

125

135

Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

USD v Yen

From unconventional to conventional monetary policy

United States

US – quantitative easing has worked

Source: Bloomberg, UBS

23

-6

-4

-2

0

2

4

6

90 92 94 96 98 00 02 04 06 08 10 12 14

US GDP (yoy%)

53.351

57

61.9

67.1

70.768.8

53.1

56 56.458.4

66.1

77.7

82.9

50

55

60

65

70

75

80

85

01 02 03 04 05 06 07 08 09 10 11 12 13 14

US Household Net Worth ($tn)

-20

-15

-10

-5

0

5

10

15

20

01 02 04 05 07 08 10 11 13 14

Case Shiller US House Prices (yoy%)

US – inflation pressures?

Source: Bloomberg, UBS

24

1

2

2

3

3

4

4

5

5

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Employment cost index (yoy%)

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

US CPI (yoy%)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Core CPI (yoy%)

US – employment growth solid

Source: Bloomberg, UBS

25

4

5

6

7

8

9

10

11

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

US Unemployment rate (%)

-1000

-800

-600

-400

-200

0

200

400

600

91 92 94 95 97 98 00 01 03 04 06 07 09 10 12 13 15

US Non-farm payrolls(%)

From crisis to stability

Europe

27

Europe – recovering

Source: Bloomberg, UBS 27

-6

-4

-2

0

2

4

07 08 09 10 11 12 13 14 15

Europe GDP (yoy%)

-8

-6

-4

-2

0

2

4

6

8

99 01 02 03 04 05 06 08 09 10 11 12 13 15

Core Europe GDP (yoy%)

Germany France Italy

-6

-4

-2

0

2

4

6

8

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Peripheral Europe GDP (yoy%)

Portugal Spain

28

Europe – lead indicators improving

Source: Bloomberg, UBS28

44

46

48

50

52

54

Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15

Eurozone composite PMI (Index)

Services

Manufacturing

Composite

-8

-4

4

8

12

16

03 04 06 07 09 10 12 13 15

Eurozone bank lending - Non-financial corporates (yoy%)

80

85

90

95

100

105

110

115

05 06 08 09 11 12 14 15

IFO Business Expectations (Index)

29

Europe – deflation easing as an issue

Source: Bloomberg, UBS29

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Eurozone CPI (yoy%)

1

1.05

1.1

1.15

1.2

1.25

1.3

1.35

1.4

1.45

Jan-12 Jan-13 Jan-14 Jan-15

EUR/USD

0

0.5

1

1.5

2

Jan-12 Nov-12 Sep-13 Jul-14 May-15

German 10 year bond yield (%)

The world is healing but …volatility remains

30

31

Tactical Beta Fund – Conservative

Asset

Allocation

Limits

Strategic

Weights

Tactical

Weights

INCOME ASSETS

Cash 0-30 5.0% 13.6%

Australian Government Bonds

20-90

20.0% 20.5%

International Government

Bonds25.0% -0.1%

Investment Grade Credit 0-40 13.0% 18.3%

High Yield Credit 0-10 4.0% 4.2%

Emerging Market Debt 0-10 3.0% 1.7%

TOTAL 40-90 70.0% 58.2%

GROWTH ASSETS

Property securities 0-10 2.0% 2.0%

Australian Equities 0-30 15.0% 13.2%

International Equities 0-50 13.0% 26.6%

TOTAL 10-60 30.0% 41.8%

Alternative Strategies

Foreign Currency Exposure 0-15 0.0% 0.0%

*May exceed upper limit of this range for extended periods due to market movements

or significant cash flows.

Source: UBS Global Asset Management.

As at 31 August 2015

Portfolio strategy

This Fund aims to provide a total return (after

management costs) in excess of its Neutral

Allocation. Over a full investment cycle

(usually three to five years), this Neutral

Allocation displays performance

characteristics of CPI + 4.5% pa on average.

Access to a broad range of asset classes.

Neutral (average over cycle) asset exposure:

– 70% Income

– 30% Growth

Fund size: $103.4 million

Distributions: Quarterly

Total MER: 0.35% pa

32

Tactical Beta Fund – Balanced

Asset

Allocation

Limits

Strategic

Weights

Tactical

Weights

INCOME ASSETS

Cash 0-30 4.0% 6.6%

Australian Government Bonds

10-70

14.0% 15.1%

International Government

Bonds18.0% -2.3%

Investment Grade Credit 0-35 9.0% 14.8%

High Yield Credit 0-10 3.0% 3.3%

Emerging Market Debt 0-10 2.0% 0.9%

TOTAL 25-75 50.0% 38.4%

GROWTH ASSETS

Property securities 0-13 4.0% 4.0%

Australian Equities 8-45 23.0% 21.1%

International Equities 8-60 23.0% 36.5%

TOTAL 25-75 50.0% 61.6%

Alternative Strategies 0-10 0.0% 0.0%

Foreign Currency Exposure 0-25 0.0% 0.0%

*May exceed upper limit of this range for extended periods due to market movements

or significant cash flows.

Source: UBS Global Asset Management.

As at 31 August 2015

Portfolio strategy

This Fund aims to provide a total return (after

management costs) in excess of its Neutral

Allocation. Over a full investment cycle

(usually three to five years), this Neutral

Allocation displays performance

characteristics of CPI + 5% pa on average.

Access to a broad range of asset classes.

Neutral (average over cycle) asset exposure:

– 50% Income

– 50% Growth

Fund size: $200.6 million

Distributions: Quarterly

Total MER: 0.35% pa

33

Tactical Beta Fund – Growth

Asset

Allocation

Limits

Strategic

Weights

Tactical

Weights

INCOME ASSETS

Cash 0-30 2.0% 2.3%

Australian Government Bonds

0-50

8.0% 7.4%

International Government

Bonds10.0% -6.1%

Investment Grade Credit 0-30 5.0% 10.2%

High Yield Credit 0-10 3.0% 3.1%

Emerging Market Debt 0-10 2.0% 1.0%

TOTAL 10-60 30.0% 17.9%

GROWTH ASSETS

Property securities 0-15 5.0% 5.0%

Australian Equities 15-60 30.0% 28.4%

International Equities 15-70 35.0% 48.7%

TOTAL 40-90 70.0% 82.1%

Alternative Strategies 0-20 0.0% 0.0%

Foreign Currency Exposure 0-35 0.0% 0.0%

*May exceed upper limit of this range for extended periods due to market movements

or significant cash flows.

Source: UBS Global Asset Management.

As at 31 August 2015

Portfolio strategy

This Fund aims to provide a total return (after

management costs) in excess of its Neutral

Allocation. Over a full investment cycle

(usually three to five years), this Neutral

Allocation displays performance

characteristics of CPI + 6% pa on average.

Access to a broad range of asset classes.

Neutral (average over cycle) asset exposure:

– 30% Income

– 70% Growth

Fund size: $97.6 million

Distributions: Quarterly

Total MER: 0.35% pa

Disclaimer

This presentation and accompanying documents is intended to provide general information only and has been prepared by UBS Global

Asset Management (Australia) Ltd (ABN 31 003 146 290) (AFS Licence No. 222605) without taking into account any particular person’s

objectives, financial situation or needs. Investors should before acting on the information provided in this presentation, consider the

appropriateness of the information having regard to their personal objectives, financial situation or needs.

Any opinions expressed in this material are those of UBS Global Asset Management (Australia) Ltd, a member of the Global Asset

Management division of UBS AG, and are subject to change without notice. Although all information in this presentation and documents

is obtained in good faith from sources believed to be reliable no representation of warranty, express or implied is made as to its

accuracy or completeness. Neither UBS AG nor any of its affiliates, directors, employees or agents accepts any liability for any loss or

damage arising out of the use of all or any part of this material.

The information provided during this presentation must not be relied on to make an investment decision. It is not an offer or

recommendation to acquire an interest in the UBS Managed Investment Funds (UBS Funds) or recommendation to purchase or sell

any particular security. Offers of interests in the UBS Funds are contained in the relevant current Product Disclosure Statement (PDS).

An investment in any of the UBS Funds does not represent deposits or other liabilities of UBS AG or any other member company of the

UBS Group. Your investment is subject to investment risk, including possible delays in repayment and loss of income and capital

invested. The repayment of capital or income is not guaranteed by any company in the UBS Group.

Performance can be volatile and future returns can vary from past returns. Up-to-date performance information can be obtained by

contacting UBS Global Asset Management (Australia) Ltd. A copy of the PDS is available from UBS Global Asset Management

(Australia) Ltd, the issuer of the UBS Funds, on (02) 9324 3222 or freecall on 1800 023 043. You should consider that PDS and obtain

professional advice before making any decision about whether to acquire or continue to hold an investment in the Fund(s).

This document may not be reproduced or copies circulated without prior authority from UBS Global Asset Management (Australia) Ltd.

© UBS 2011. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

35

DISCLAIMER

FOR FINANCIAL ADVISER USE ONLY

This information has been prepared and issued by netwealth Investments

Limited (“netwealth”), ABN 85 090 569 109, AFSL 230975, ARSN 604 930

252 for the general information of its advisor clients only. It is a general

summary only and contains opinions on some publically released

information and is not advice.

While care has been taken in the preparation of this information (using

sources believed to be reliable and accurate), netwealth does not warrant or

represent that the information is accurate, complete or current. netwealth,

any other member of the netwealth group of companies, their officers,

employees or representatives will not be liable for any loss or damage

suffered by any person arising from reliance on any of this information.

Anyone proposing to rely on or use the information should first obtain

appropriate independent professional advice.