Private markets asset allocation guide

Daniel Scansaroli, Ph. D. Jennifer Liu Christopher Buckley

Head of Portfolio Strategy & UBS Private Markets Strategist Americas Portfolio Strategist Americas
Wealth Way Solutions, Americas

UBS GWM Chief Investment Office

This report has been prepared by UBS Financial Services, Inc.
Please see important disclaimers and disclosures at the end of the document.

All investments involve the risk of loss, including the risk of loss of the entire investment.
Timeframes may vary. Strategies are subject to individual client goals, objectives and suitability.

May 2023
Table of contents

Section 1 What are private markets? 2

Section 2 Why invest in private markets? 11

Section 3 Constructing a private markets portfolio allocation 20

Section 4 Appendix 35
Section 1

What are private markets?

What are private markets?
Private markets are strategies that allow investors to Number of US publicly traded companies
access investments that aren’t traded on public
exchanges.
8,000 8,090
There are three main private market asset classes:

1. Private debt includes strategies like direct

lending, which originates loans to middle market 7,000 46% decline in the
companies. # of US public
companies since
2. Private real estate strategies invest in debt or 1996
equity tied to commercial and residential real 6,000
estate. Unlike real estate investment trusts (REITs),
private real estate ownership is not traded on a
public exchange.
5,164
5,000
3. Private equity invests in companies that aren’t
listed on a public exchange. The number of public 4,397
companies has declined drastically due to
acquisitions, lower IPO activity, and greater access
4,000
to private capital. With many companies delivering
1980 2000 2020
substantial growth prior to going public, we are
seeing a larger opportunity set for venture capital, Source: UBS, World Bank.
growth equity, and buyout funds to invest in
private companies at each stage of development.
3
Adding private investments can enhance growth potential…
A 15-year lookback, adding a 30% allocation to private assets in a 60/40 portfolio

300
60% global equities / 40% global equities / 30% US
40% US bonds bonds / 30% alternatives Illustrative privates
250 Return (ann.) 4.0% 5.7% allocation
Risk (ann.) 11.4% 9.6%
Sharpe ratio 0.40 0.63
Private Real
200 Estate, 5%

Private Equity,
15%
150 Private Debt,
10%

100

50
6/1/2008

6/1/2009

6/1/2010

6/1/2011

6/1/2012

6/1/2013

6/1/2014

6/1/2015

6/1/2016

6/1/2017

6/1/2018

6/1/2019

6/1/2020

6/1/2021

6/1/2022
12/1/2009

12/1/2020
12/1/2007

12/1/2008

12/1/2010

12/1/2011

12/1/2012

12/1/2013

12/1/2014

12/1/2015

12/1/2016

12/1/2017

12/1/2018

12/1/2019

12/1/2021
60% global equities / 40% US bonds 40% global equities / 30% US bonds / 30% alternatives

Source: Refinitiv, Cambridge Associates, Morningstar, UBS, as of 30 Sept 2022. Global equities (MSCI ACWI), US bonds (Bloomberg US Agg), private equity (Cambridge
Global Private Equity), private debt (Cliffwater Direct Lending Index), private real estate (Cambridge Private Real Estate). For illustrative purposes only. Performance 4
figures refer to the past and past performance is not a reliable indicator of future performance / results.
Please always read in conjunction with the glossary and the risk information at the end of the document.
…and private investments can cushion capital drawdowns
Including private investments to a 60/40 portfolio would have reduced drawdown severity historically

0%

-5%

-10%

-15%

-20%

-25%

-30%

-35%
4/1/2008
8/1/2008

4/1/2009
8/1/2009

4/1/2010
8/1/2010

4/1/2011
8/1/2011

4/1/2012
8/1/2012

4/1/2013
8/1/2013

4/1/2014
8/1/2014

4/1/2015
8/1/2015

4/1/2016
8/1/2016

4/1/2017
8/1/2017

4/1/2018
8/1/2018

4/1/2019
8/1/2019

4/1/2020
8/1/2020

4/1/2021
8/1/2021

4/1/2022
8/1/2022
12/1/2007

12/1/2008

12/1/2009

12/1/2010

12/1/2011

12/1/2012

12/1/2013

12/1/2014

12/1/2015

12/1/2016

12/1/2017

12/1/2018

12/1/2019

12/1/2020

12/1/2021
60% global equities / 40% US bonds 40% global equities / 30% US bonds / 30% alternatives

Source: Refinitiv, Cambridge Associates, Morningstar, UBS, as of 30 Sept 2022. Global equities (MSCI ACWI), US bonds (Bloomberg US Agg), private equity (Cambridge
Global Private Equity), private debt (Cliffwater Direct Lending Index), private real estate (Cambridge Private Real Estate). For illustrative purposes only. Performance 5
figures refer to the past and past performance is not a reliable indicator of future performance / results.
Please always read in conjunction with the glossary and the risk information at the end of the document.
Private equity and private debt investment strategies
A variety of strategies to invest – not easily accessible to investors investing only in traditional assets

Key private equity strategies per stage of company life cycle

Buyout

Growth
Company value

Distressed debt

Venture

Company life cycle stage

Venture Capital Growth Capital Buyout Distressed debt

• Focus on “building businesses” • Focus on companies that are • Focus on mature businesses • Distressed debt
• Invest in companies already producing revenues or with stable cash flows
− in conceptual/ profits • Invest in companies Private debt (not categorized in
development stage • Invest in companies − that may require cost above chart)
− with revenues or profits − ready for scale optimization • Direct lending
several years away − in need of capital to finance − that can benefit from new • Mezzanine / subordinated debt
• Rarely use leverage growth strategic direction • Special situations
• Rarely use leverage • Use of debt component to • Specialty finance
maximize equity returns

Source: UBS. For illustrative purposes only.

Please always read in conjunction with the glossary and the risk information at the end of the document. 6
Private equity
Private equity funds are pools of actively managed capital that invest in public and private companies, and encompass a
variety of strategies

What are key characteristics of private equity? Private equity strategy examples
 Whether they specialize in young or mature companies, private equity
 Venture: focused on starting or building businesses by investing in
managers generally take an active role in the management of the
newly developed or underdeveloped companies, usually at an early stage
portfolio companies they invest in
in a company’s life cycle
 Private equity managers are focused on sourcing investment
opportunities, enhancing the value after an investment is made, and  Growth equity: provide equity or debt financing to a company for an
being able to exit for a strong profit anticipated period of significant growth or expansion
 Source  Mezzanine: typically a hybrid of debt and equity financing that gives
– Identify target company the PE manager the rights to convert to equity interests
– Conduct due diligence  Special situations: investments that capitalize on a range of
– Explore ways to add value opportunities such as changing government regulations or industry
– Create appropriate investment structure trends
 Enhance value  Buyouts: majority or significant control of mature, well-established
– Structure financing companies
– Partner with company management
– Advise on strategic, operational and financial issues
– Provide access to industry contacts
– Cut costs and enhance bottom line profits
Venture
Mezzanine
 Exit capital
– Sell to strategic or financial buyers
– Initial public offering
– Recapitalization
– Sell securities in the private market
– Exercise provisions of structured investments Growth
Buyouts
capital

Special
situations

7
Private credit
Private credit is an investment in debt that is not liquid and readily tradable on a public exchange. The underlying
investments, structures and strategies are more expansive than liquid credit market investment options

Understanding private credit strategies Private credit examples

 Unlike public credit strategies (ex: high yield, investment grade debt or  Direct lending: The practice of non-bank lenders extending loans to
Treasuries), private credit investments are offered through a private small and medium-sized businesses in return for debt securities rather
placement, where investors are locked up for a period of time and than equity.
unable to sell out of their investment
 Distressed & special situations: Debt of companies that have filed for
 Private credit strategies are illiquid investments due to the underlying bankruptcy or have a significant chance of filing for bankruptcy in the
type of credit within the fund, which is not heavily traded near future
 Some strategies focus on generating high yields compared to what is  Venture debt: Debt to venture capital-backed companies by a
available in the public credit markets. Other strategies focus on capital specialized financier to fund-working capital or capital expenses. Venture
appreciation of the underlying asset that the credit is backed by debt providers combine their loans with warrants or rights to purchase
equity, to compensate for the higher risk of lending
 Private credit strategies are dynamic and can provide investors a range of
risks and returns broader than public credit offerings  Mezzanine: Investments in debt subordinate to the primary debt
issuance and senior to equity positions
Within these categories, the private credit investments can be further
differentiated and specialized. For example, within structured credit,
managers can invest in CLOs, CRE, RMBS, or consumer ABS among many
Direct other structured credit sub-categories. Even further, a manager can be
Mezzanine
lending more specialized and invest in only equity CLOs or only debt CLOs

Distressed
Venture
& special
debt
situations

8
Private real estate
Real estate funds are pools of actively managed capital that invest in a range of properties, which may also offer a hedge
against inflation or deliver a strong income yield to the investor

What are key characteristics of private real estate? Private real estate examples
 Enhanced returns: opportunity for returns from a combination of  Commercial real estate investments can be divided into four main
income and price appreciation strategies described further in the chart below
 Potential inflation hedge: rental income often increases as the – Core
economy strengthens and inflation rises; real estate is thus a potential
– Core plus
hedge against inflation
– Value-added
 Property types: Include office, retail, industrial, multi-family residential
and specialty (such as hotels, medical facilities, self-storage, farmland) – Opportunistic

Real estate strategies Core Core plus Value-added Opportunistic

Leverage None or low Moderate Moderate High
Cycle 7 - 10 years 4 - 7 years 5 - 8 years 2 - 4 years
Near or fully ooccupied Near or fully occupied; long-term Occupied mid-term leases with Occupancy may be low; leases of large
Occupancy at time of investment
long-term leases leases with gradual expirations balanced expirations tenant(s) may be expiring soon
Current income; moderate Income upon stabilization; strong Little income; investment is made for
Income at time of investment Current income
capital appreciation capital appreciation potential capital appreciation potential

9
Section 2

Why invest in private markets?

Why invest in private markets?
A differentiated investment universe with the potential for higher risk-adjusted returns through active management

Expands the investment universe

Not investing in private markets means missing out opportunities: 95% of all US companies are privately held.1
Private markets give access to a broader investment universe: access to early stage and middle market companies,
new technologies, opportunistic and niche credit strategies unavailable through traditional asset classes, to name a
few.

Illiquidity premium
Private markets have generated stronger risk-adjusted returns than global equities, global bonds and other asset
classes.2 Better access to information, active management, inefficient markets, value creation initiatives for portfolio
companies, and leverage can enhance returns over public markets

Prevents panic selling and focus on the long term

The illiquid, long-term nature of private markets prevents panic selling during distressed markets, when it is often the
best time to increase rather than reduce market exposure. It can also protect investors from trying to time the
market. In times of uncertainty and market dislocation, private markets have performed exceptionally well.

Performance figures refer to the past and past performance is not a reliable indicator of future performance/results and prior investment with a
11
manager does not guarantee future investments. Please always read in conjunction with the glossary and the risk information at the end of the document.
Private equity opportunities are expanding
Public opportunities are shrinking, while private opportunities are expanding

Investors, who only focus on public markets, are Number of public vs. private equity-owned companies
missing an increasingly large opportunity set.
9,000
8,562
8,000

7,000 6,917

6,000

5,000

4,000
4,266
3,000
> Companies are choosing to stay private due to
less regulation, disclosure, and short-term 2,000
investor pressure. 1,698
1,000
> A growing pool of privately owned companies
should support absorption of outstanding dry 0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
powder longer term.

U.S. Listed Companies Private Equity-Owned Companies

Source: World Bank, World Federation of Exchanges, PitchBook, UBS. Data as of December 31, 2021

Source: UBS. For illustrative purposes only.

Please always read in conjunction with the glossary and the risk information at the end of the document. 12
Private markets managers create value
Private equity has continued to grow its focus on operational improvements

• Buyout strategies seek to earn returns through debt pay down, multiple expansion, and operational value creation
• Cost reductions, organic growth initiatives, and sale of non-core assets can drive macro-resilient value creation
• With value creation largely driven by manager skill, funds with proven results across multiple cycles are attractive in a mid-to-late cycle
environment

Operational value creation Source of private equity returns through the decades
100%
10%
25%
32%
80%
Appreciation drivers Multiple 51% 30%
expansion
60%
Operational 39%
Company value

value creation
46%
40%
31%
60%

Equity 20% 36%

Equity
18% 22%

0%
Debt paydown Leverage (1980s) Multiple Earnings growth Operational
expansion (1990s) (2000s) improvement
Debt Leverage (2010s)
Debt
Multiple expansion
Operational improvement (top line growth and margin expansion)
Entry Exit
Source: EY, "Creating value throughout the private equity investment life cycle in the
digital era", 2019

Source: UBS. For illustrative purposes only. 13

Performance figures refer to the past and past performance is not a reliable indicator of future performance/results.
Please always read in conjunction with the glossary and the risk information at the end of the document.
Attractive risk / return characteristics
Private markets have provided better risk-adjusted returns over the long-term than other major asset classes

Compound annual total return by asset class Excess return per unit of risk (Sharpe ratio) by asset class
USD, 18 years ending 30 Sept 2022. USD, 18 years ending 30 Sept 2022.

Global private equity 1.00

11.5%
Global private real
0.45
estate
8.8%

Direct lending 2.09

5.6%
4.6% Global equity 0.27
4.1%
3.5%
2.7%
Hedge funds 0.38

US bonds 0.51
Global Global Direct Global Hedge US bonds US high
private private lending equity funds yield
equity real estate bonds US high yield bonds 0.47

Average risk p.a. (standard deviation of total return)

Source: Refinitiv, Cambridge Associates, Morningstar, UBS. Data as of 30 Sept 2022. For illustrative purposes only.
Global private equity (Cambridge Private Equity), global private real estate (Cambridge Real Estate), direct lending (Cliffwater Direct Lending Index), global equities (MSCI
ACWI), hedge funds (HFRI Fund Weighted Composite), US bonds (Bloomberg US Agg), US high yield bonds (ICE BoA High Yield Constrained), Morningstar, FactSet. 14
Performance figures refer to the past and past performance is not a reliable indicator of future performance / results.
Please always read in conjunction with the glossary and the risk information at the end of the document.
Privates investments are expected enhance portfolio
characteristics
10.0%

9.0% Private equity

8.0%
Direct lending
Private real estate
7.0%

6.0%
Expected return

100% global equity

5.0%

4.0%

100% US bonds
3.0%

2.0%

1.0%

0.0%
2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
Expected risk

Source: UBS Wealth Management USA Asset Allocation Committee, as of 13 Feb 2023. SAA models are UHNW (including alternative investments) & taxable, no alternatives
(excluding alternative investments). Asset allocation does not assure profits or prevent against losses from an investment portfolio or accounts in a declining ma rket. See 15
Important Information section, Wealth Management USA Asset Allocation Committee and the UBS Capital Market Assumptions and Strategic Asset Allocation Models, for more
information.
Cumulative growth of private asset classes
Private equity & private debt historically outperformed public equity & public debt

650

550

450

350

250

150

50
4/1/2008
8/1/2008

4/1/2009
8/1/2009

4/1/2010
8/1/2010

4/1/2011
8/1/2011

4/1/2012
8/1/2012

4/1/2013
8/1/2013

4/1/2014
8/1/2014

4/1/2015
8/1/2015

4/1/2016
8/1/2016

4/1/2017
8/1/2017

4/1/2018
8/1/2018

4/1/2019
8/1/2019

4/1/2020
8/1/2020

4/1/2021
8/1/2021

4/1/2022
8/1/2022
12/1/2007

12/1/2008

12/1/2009

12/1/2010

12/1/2011

12/1/2012

12/1/2013

12/1/2014

12/1/2015

12/1/2016

12/1/2017

12/1/2018

12/1/2019

12/1/2020

12/1/2021
Global private equity Private debt Global private real estate Global equity US bonds

Source: Refinitiv, Cambridge Associates, Morningstar, UBS, as of 30 Sept 2022. Global private equity (Cambridge Private Equity), global private real estate (Cambridge Real
Estate), direct lending (Cliffwater Direct Lending Index), global equities (MSCI ACWI), hedge funds (HFRI Fund Weighted Composite), US bonds (Bloomberg US Agg), US high 16
yield bonds (ICE BoA High Yield Constrained). For illustrative purposes only. Performance figures refer to the past and past performance is not a reliable indicator of
future performance / results. Please always read in conjunction with the glossary and the risk information at the end of the document.
Private equity has delivered consistent outperformance
Global private equity has outperformed public equity market equivalents across multiple cycles

Vintage year IRR comparison between global PE and mPME: public equities
35%

30%

25%

20%

15%

10%

5%

0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Cambridge global buyout mPME: MSCI ACWI

Source: Refinitiv, Cambridge Associates, UBS, as of 30 Sept 2022. For illustrative purposes only.
Note: Given most funds take a few years for performance to settle, performance of recent vintage years may be less meaningful. mPME is a virtual replication of private
investment cash flows invested under public market conditions. Private investment contributions are invested “on paper” in a chosen public market index and distributions
are taken out in the same proportion as in the private investment. https://www.cambridgeassociates.com/wp-content/uploads/2014/02/CA-PE-and-VC-Benchmarks- 17
Overview-Definitions-and-FAQs.pdf Performance figures refer to the past and past performance is not a reliable indicator of future performance / results.
Please always read in conjunction with the glossary and the risk information at the end of the document.
Institutions commonly use privates in their allocations
US endowment asset allocation

On average, endowments allocate

over 30% of assets into private
markets
Private
markets, 30%

Public markets,
70%

Source: NACUBO based on fiscal year 2022 allocations. 18

Section 3

Constructing a private markets portfolio

allocation
 Private markets portfolio construction roadmap
Building and maintaining a well-diversified private markets portfolio is a dynamic, complex process. The below roadmap
highlights the key steps in constructing, implementing and maintaining a private markets portfolio

Construct an  Identify general investment goals and objectives and types

investment plan of strategies that align with these goals
5  Considerations may include cash flow needs, illiquidity
Ongoing comfort, income needs, tax impact, risk tolerance,
management constraints or restrictions
Identify broad  Ascertain broad allocation target for private strategies
allocations within overall portfolio relative to illiquidity risks and
objectives
2  Review existing commitments to private markets to
Identify broad understand current exposures and unfunded commitment
asset allocations amounts
Tactical  Identify market dislocations and lean into opportunities
opportunities based on market conditions and fundamental valuations,
4 within a diversified allocation
Implementation How to implement  Due diligence and choose a diversified set of funds across
3 various sponsors which align to the portfolio’s asset class
Tactical and sector exposures
opportunities  Diversify across private asset classes, sectors, stages and
1 geographies
Investment plan  Commit across multiple years to achieve vintage year
diversification and mitigate entry point risks
 Evaluate expected capital calls and distributions to achieve
Pre-implementation planning Post-investment long-term asset allocation targets
management  Manage liquidity needs for capital calls relative to
Ongoing
distributions
maintenance and
monitoring  Evaluate additional commitments needed to
build/maintain privates relative to allocation targets
 Monitoring of GP performance is also critical to assess the
attractiveness of investing in a follow-on fund 20
The role of alternatives in a portfolio
Private Equity Private Credit
Benefits Benefits
• Growth / capital appreciation with a potential • Income – Can offer higher income and return
premium above public market equities potential with lower correlation to traditional
fixed income markets
• Active role that managers can have in the
companies that they invest in to produce • Direct lending strategies can benefit in a rising
additional value rate environment given their floating rate
nature and short duration; interest rate floors
Risks
may be used to protect investors in a declining
• Leverage – While prudent leverage can rate environment
Private Equity Private Credit
enhance returns, it can also magnify risks in
• Distressed debt strategies perform best in
times of adverse market or company
Growth Income times of market dislocation. Managers can
performance
take advantage of mispriced positions in
• Private companies can have less access to sound companies
capital and increased growth and execution
Risks
risks which can result in a total loss of capital
Mix • Defaults – Continued higher hikes in interest
rates will add pressure to companies’ ability to
service their borrowing costs. Investors should
also understand where the private debt sits in
Private Real a capital structure in case of bankruptcy
Estate
Private Real Estate
Benefits:
• Income and capital appreciation – Real estate offers investors the opportunity to have an ongoing stream of income,
depending on the property type. In addition to potentially earning a stream of income from real estate, investors can
generate returns through property appreciation and selling for a premium to the purchase price.
• Inflation protection – Real estate commonly increases in value as the cost of goods rises over time. Real estate lease
contracts commonly include Consumer Price Index or similar upward moving escalators, which protects investments from
rising inflation if structured as such.
Risks
• Macro factors / occupancy – Factors such as remote working could impact lease revenues, occupancy, lease renewal rates,
and market rents which could adversely affect returns in office sectors while macro factors and rising interest rates could
lead to cap rate expansion in residential 21

Source: UBS.
How much should I allocate to private markets?
Probability that liquid assets fall below three years' worth of cash flow needs, based on spending and illiquid %

40%
Allocation to private markets

35%
Higher risk
30% (>25% risk)
25%
20% Caution
15% (10-25% risk)

10% Low risk

(<10% risk of
5%
liquidity issues)
0%
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
Annual spending from portfolio
(% of invested assets)

Source: UBS. Investing in private markets with the UBS Wealth Way. Note: The liquid portfolio assumes a broad range of weights between global equity (MSCI ACWI)
and global fixed income (Bloomberg Barclays Global Aggregate). The PE portfolio is considered mature with yearly contributions depending on the PE target. Monte
22
Carlo simulations of the liquid portfolio values reflect severe bear market performance lasting three years. All cash flow needs are taken on an annual basis. We assume
no slowdown in capital calls and assume no distributions.
Appraisal based pricing can understate risk
Illiquidity of private markets masks the true volatility of strategies

Global Financial Crisis: Statement Median IRR (%) and Applying unsmoothing methodology to historical risk
Unsmoothed IRR
23.2% 23.8%
25
20
15 17.4% 17.4%
10
5
0 11.4%
9.9% 10.4%
-5
-10
-15 4.9%
3.6%
-20
-25
03-2008 06-2008 09-2008 12-2008 03-2009 06-2009
Private equity Global Direct lending Leveraged Private real Public REITs
Global Growth Private Equity equities loans estate
Global Growth Private Equity (Unsmoothed)
Historical risk (18y) Unsmoothed risk
MSCI ACWI
 Return streams for illiquid assets tend to come with “sticky” prices which mask volatility
– General Partners use Financial Account Standards Board techniques in appraisal based valuation models, like public market
comparable, private transaction comparable & discounted cash flow models to estimate Net Asset Values to account for the lack of
mark-to-mark price discovery that exists in publicly traded securities
– Valuation techniques build on previous valuations and changes to fundamentals which can cause persistence in valuations that
“smooth” the estimated return experience over time
 To combat hidden risks from illiquidity we analyze and “unsmooth” returns using the Fisher-Geltner-Webb (1994) methodology to gain
a more accurate gage on the underlying volatility.
Source: Cambridge Associates, UBS. Fisher, J., D. Geltner, and B. Webb. “Value indices of commercial real estate: A comparison of index construction methods,”The
23
Journal of Real Estate Finance and Economics 9.2” (1994)
Sizing private equity
Adapting Fortune’s Formula: Kelly Capital Growth

Recommended private equity sizing by stage

Vintage year 1994 - 2021 to maximize capital growth
US mPME:
Global
mPME:
Global
mPME: 19%
Venture Russell MSCI MSCI
Growth Buyout
Capital 2000 World World
Average pooled IRR (%) 23.1% 5.8% 14.1% 4.5% 15.1% 4.8%
Std Deviation IRR (%) 24.3% 7.3% 7.0% 6.6% 6.1% 6.5% 45%
Buyout
Upper Quartile IRR (%) 25.7% 19.5% 21.7%
Lower Quartile IRR (%) 4.0% 3.0% 6.7% Growth
Average Pooled TVPI 2.36x 1.49x 1.83x 1.31x 1.75x 1.27x Venture
Std Deviation TVPI 1.14x 0.33x 0.37x 0.24x 0.29x 0.19x
Unsmoothed Std Deviation IRR (%) 38.6% 24.2% 16.1% 37%
Unsmoothed Std Deviation TVPI 1.99x 0.59x 0.44x

 Investing in private markets comes with higher potential gains but also higher potential for total loss of capital.
– Risk of capital loss tends to increase for earlier stage companies over later stage companies with positive cash flow
– Unlike public market investing, private market investing entails sequencing of deals. If an investments is oversized and experiences a
large loss, it limits the capital growth potential of all subsequent investments and increases the odds of capital destruction
– On the other hand, a good deal which is undersized, leaves wealth generation potential on the table
– Investing in privates requires a balance to capture “edge” in outperforming, with the chances of “ruin” when deals don’t materialize
 We utilize lessons around optimal betting strategies from John Kelly at Bell Labs to “maximize capital over the long-
term” by mitigating destructive effects of potential for “ruin in the short-term”.
 The unsmoothed standard deviation provides one measure of odds of “ruin”, which is coupled with the “edge” we
believe a strategy poses, to sizing private equity stages.

Source: Cambridge Associates, UBS. Fisher, J., D. Geltner, and B. Webb. “Value indices of commercial real estate: A comparison of index construction methods,”The
24
Journal of Real Estate Finance and Economics 9.2” (1994)
Alternatives allocations across risk profiles
Conservative Moderate Aggressive

3% 7%
3% 20%
27%

5%
55%
12% 11% 64%

87% 6%
Privates 13.0% 45.0% 80.0%
Private Equity 3.0% 27.0% 64.0%
Buyout 3.0% 16.0% 27.0%
Growth equity 0.0% 5.0% 22.0%
Venture capital 0.0% 3.0% 12.0%
Secondaries 0.0% 3.0% 3.0%
Private Credit 7.0% 12.0% 11.0%
Direct lending 7.0% 9.0% 8.0%
Distressed credit 0.0% 3.0% 3.0%
Private Real Estate 3.0% 6.0% 5.0%
Core / core + 3.0% 6.0% 3.0%
Opportunistic 0.0% 0.0% 2.0%
Hedge Funds 87.0% 55.0% 20.0%
Multi-strategy 13.0% 4.0% 1.0%
Global macro 30.0% 11.0% 2.0%
Event driven 9.0% 11.0% 5.0%
Relative value 26.0% 14.0% 4.0%
Equity hedge 9.0% 15.0% 8.0%
Total 100.0% 100.0% 100.0%
Expected compound strategic return 5.8% 7.3% 8.9%
Expected risk 5.2% 7.6% 10.9%
Expected risk (unsmoothed) 5.7% 10.3% 17.3%
Expected Sharpe ratio 1.11 0.96 0.81
Expected Sharpe ratio (unsmoothed) 1.02 0.70 0.51
Objective Diversification & income Balancing growth & income Growth / capital appreciation
Source: UBS Wealth Management USA Asset Allocation Committee, as of 13 Feb 2023. Refinitiv, Cambridge Associates, Morningstar, UBS, as of 30 Sept 2022. Expected risk for each
allocation aligns with risk bands when accounting for illiquidity risk, illustrated by unsmoothed return + risk. For illustrative purposes only. . Asset allocation does not assure profits or 25
prevent against losses from an investment portfolio or accounts in a declining market. See Important Information section, Wealth Management USA Asset Allocation Committee
and the UBS Capital Market Assumptions and Strategic Asset Allocation Models, for more information.
Historical return analysis
Simulated historical growth of $100
900
800
700
600
500
400
300
200
100
0
Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Sep-13 Dec-14 Mar-16 Jun-17 Sep-18 Dec-19 Mar-21 Jun-22

Conservative alternatives Moderate alternatives Aggressive alternatives S&P 500 Bloomberg US Agg

Simulated historical drawdowns

0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
-40%
-45%
-50%
Mar-05 Jun-06 Sep-07 Dec-08 Mar-10 Jun-11 Sep-12 Dec-13 Mar-15 Jun-16 Sep-17 Dec-18 Mar-20 Jun-21 Sep-22

Source: Refinitiv, Cambridge Associates, Morningstar, UBS, as of 30 Sept 2022. For illustrative purposes only. 26
Performance figures refer to the past and past performance is not a reliable indicator of future performance / results.
Please always read in conjunction with the glossary and the risk information at the end of the document.
UBS UHNW strategic asset allocations
Moderately Moderately
Asset Class Conservative Moderate Aggressive
Conservative Aggressive
Cash 2.0% 2.0% 2.0% 2.0% 2.0%
Cash 2.0% 2.0% 2.0% 2.0% 2.0%
Fixed Income 63.0% 50.0% 35.0% 19.0% 6.0%
US Fixed Income 63.0% 48.0% 33.0% 17.0% 6.0%
U.S. Government Securities (Intermediate) 9.5% 1.5% 1.0% 2.0% 0.0%
U.S. Government Securities (Long) 5.5% 0.0% 0.0% 0.0% 2.5%
Investment Grade Munis 45.0% 44.0% 30.0% 14.0% 3.5%
Investment Grade Corporates 3.0% 1.5% 0.0% 0.0% 0.0%
High Yield Corporates 0.0% 1.0% 2.0% 1.0% 0.0%
Non-U.S. Fixed Income 0.0% 2.0% 2.0% 2.0% 0.0%
Emerging Market Fixed Income (hard currency) 0.0% 1.0% 1.0% 1.0% 0.0%
Emerging Market Fixed Income (local currency) 0.0% 1.0% 1.0% 1.0% 0.0%
Equity 10.0% 23.0% 33.0% 49.0% 62.0%
U.S. Equity 7.0% 14.0% 18.5% 28.0% 34.5%
Large-Cap Growth 2.5% 5.0% 6.5% 10.0% 12.5%
Large-Cap Value 2.5% 5.0% 6.5% 10.0% 12.5%
Mid-Cap Core 1.0% 3.0% 3.5% 5.0% 6.0%
Small-Cap Core 1.0% 1.0% 2.0% 3.0% 3.5%
Non-U.S. Equity 3.0% 9.0% 14.5% 21.0% 27.5%
Developed Equity 3.0% 7.0% 10.5% 15.0% 20.0%
Emerging Equity 0.0% 2.0% 4.0% 6.0% 7.5%
Alternatives 25.0% 25.0% 30.0% 30.0% 30.0%
Private Equity 2.0% 5.0% 12.0% 17.0% 21.0%
Buyout 2.0% 3.0% 6.5% 9.0% 8.5%
Growth equity 0.0% 0.0% 2.5% 5.0% 7.5%
Venture capital 0.0% 0.0% 1.0% 2.0% 4.0%
Secondaries 0.0% 2.0% 2.0% 1.0% 1.0%
Private Credit 7.0% 6.0% 5.0% 5.0% 3.0%
Direct lending 7.0% 6.0% 4.0% 3.5% 2.0%
Distressed credit 0.0% 0.0% 1.0% 1.5% 1.0%
Private Real Estate 2.0% 4.0% 2.0% 2.0% 2.0%
Core / core + 2.0% 4.0% 2.0% 2.0% 1.0%
Opportunistic 0.0% 0.0% 0.0% 0.0% 1.0%
Hedge Funds 14.0% 10.0% 11.0% 6.0% 4.0%
Multi-strategy 2.5% 1.0% 1.0% 0.0% 0.0%
Global macro 4.5% 3.0% 2.0% 1.0% 0.0%
Event driven 1.5% 1.5% 2.0% 1.5% 1.5%
Relative value 4.0% 3.0% 3.0% 1.5% 1.0%
Equity hedge 1.5% 1.5% 3.0% 2.0% 1.5%
Total 100.0% 100.0% 100.0% 100.0% 100.0%

Expected strategic compound return: 4.6% 5.4% 6.1% 6.7% 7.1%

Expected equilibrium compound return: 4.6% 5.4% 6.2% 7.1% 7.7%
Expected risk: 3.7% 5.7% 8.0% 10.8% 13.0%
Expected risk (unsmoothed): 4.0% 6.5% 9.2% 12.3% 15.0%

Source: UBS Wealth Management USA Asset Allocation Committee, as of 04 May 2023. Asset allocation does not assure profits or prevent against losses from an investment 27
portfolio or accounts in a declining market. See Important Information section, Wealth Management USA Asset Allocation Committee and the UBS Capital Market Assumptions
and Strategic Asset Allocation Models, for more information.
Adding alternatives can improve a portfolio’s risk / return
profile
Expected risk and return for various risk profiles, Strategic Asset Allocations (SAAs) for taxable investors with and without
alternatives

with alternatives (private investments & hedge funds)

7.5% Aggressive
without alternatives (equities & fixed income only)
Moderately
7.0% Aggressive
Expected return, strategic compound

6.5% Moderate

6.0% Moderately
Conservative

5.5%

5.0% Conservative

4.5%

4.0%

3.5%
3.0% 5.0% 7.0% 9.0% 11.0% 13.0%
Expected volatility

Source: UBS Wealth Management USA Asset Allocation Committee, as of 13 Feb 2023. SAA models are UHNW (including alternative investments) & taxable, no alternatives
(excluding alternative investments). Asset allocation does not assure profits or prevent against losses from an investment portfolio or accounts in a declining ma rket. See 28
Important Information section, Wealth Management USA Asset Allocation Committee and the UBS Capital Market Assumptions and Strategic Asset Allocation Models, for more
information.
UBS Institutional strategic asset allocations
Moderately Moderately
Asset Class Conservative Moderate Aggressive
Conservative Aggressive
Cash 2.0% 2.0% 2.0% 2.0% 2.0%
Cash 2.0% 2.0% 2.0% 2.0% 2.0%
Fixed Income 58.0% 41.0% 30.0% 15.0% 6.0%
US Fixed Income 53.0% 37.0% 26.0% 13.0% 6.0%
U.S. Government Securities (Short) 16.0% 7.5% 3.0% 0.0% 0.0%
U.S. Government Securities (Intermediate) 11.0% 7.5% 6.5% 2.0% 0.0%
U.S. Government Securities (Long) 0.0% 3.0% 2.5% 2.0% 3.5%
Investment Grade Corporates 21.0% 15.0% 10.0% 6.5% 2.5%
High Yield Corporates 5.0% 4.0% 4.0% 2.5% 0.0%
Non-U.S. Fixed Income 5.0% 4.0% 4.0% 2.0% 0.0%
Emerging Market Fixed Income (hard currency) 2.5% 2.0% 2.0% 1.0% 0.0%
Emerging Market Fixed Income (local currency) 2.5% 2.0% 2.0% 1.0% 0.0%
Equity 10.0% 22.0% 33.0% 48.0% 52.0%
U.S. Equity 7.0% 13.5% 18.5% 27.0% 29.0%
Large-Cap Growth 2.5% 4.5% 6.5% 9.5% 10.5%
Large-Cap Value 2.5% 4.5% 6.5% 9.5% 10.5%
Mid-Cap Core 2.0% 3.0% 3.5% 5.0% 5.0%
Small-Cap Core 0.0% 1.5% 2.0% 3.0% 3.0%
Non-U.S. Equity 3.0% 8.5% 14.5% 21.0% 23.0%
Developed Equity 3.0% 6.5% 10.5% 15.5% 16.5%
Emerging Equity 0.0% 2.0% 4.0% 5.5% 6.5%
Alternatives 30.0% 35.0% 35.0% 35.0% 40.0%
Private Equity 4.0% 6.5% 14.5% 19.0% 29.0%
Buyout 2.5% 5.0% 8.5% 10.0% 13.0%
Growth equity 0.0% 0.0% 3.0% 6.0% 10.0%
Venture capital 0.0% 0.0% 1.5% 2.0% 5.0%
Secondaries 1.5% 1.5% 1.5% 1.0% 1.0%
Private Credit 7.0% 9.5% 6.0% 5.0% 5.0%
Direct lending 7.0% 9.5% 4.5% 4.0% 3.5%
Distressed credit 0.0% 0.0% 1.5% 1.0% 1.5%
Private Real Estate 3.0% 6.0% 3.5% 3.0% 2.0%
Core / core + 3.0% 6.0% 3.5% 2.0% 1.0%
Opportunistic 0.0% 0.0% 0.0% 1.0% 1.0%
Hedge Funds 16.0% 13.0% 11.0% 8.0% 4.0%
Multi-strategy 2.5% 1.5% 1.0% 0.0% 0.0%
Global macro 5.5% 3.5% 2.0% 1.0% 0.0%
Event driven 1.5% 2.0% 2.0% 2.0% 1.5%
Relative value 5.0% 3.5% 3.0% 2.0% 1.0%
Equity hedge 1.5% 2.5% 3.0% 3.0% 1.5%
Total 100.0% 100.0% 100.0% 100.0% 100.0%

Expected strategic compound return: 5.1% 5.9% 6.4% 6.9% 7.3%

Expected equilibrium compound return: 5.4% 6.3% 6.9% 7.5% 8.0%
Expected risk: 4.8% 6.6% 8.8% 11.2% 12.6%
Expected risk (unsmoothed): 5.3% 7.7% 10.3% 13.0% 15.3%

Source: UBS Wealth Management USA Asset Allocation Committee, as of 04 May 2023. Asset allocation does not assure profits or prevent against losses from an investment 29
portfolio or accounts in a declining market. See Important Information section, Wealth Management USA Asset Allocation Committee and the UBS Capital Market Assumptions
and Strategic Asset Allocation Models, for more information.
Manager selection is key
Private markets exhibit high dispersion of returns compared to traditional markets

Average annual manager returns by asset class

Actively managed long only strategies Alternative asset strategies
50%
31.0%
40% 25.1%
21.5%
30%

20% 4.8% 6.4% 7.8%

5.6% 5.6%
10% 1.8%

0%

-10%

-20%

-30%
Global ex-US US large-cap US small-cap Emerging market Core / Core + Hedge funds Global private Global private Global private
equity equity bonds real estate equity debt

4th quartile 3rd quartile 2nd quartile 1st quartile median dispersion median to 5th percentile

For illustrative purposes only

Source: Cambridge Associates, Morningstar Direct, UBS. Data covers period from 1 Jul 2008 through 30 Sept 2022. 30
Performance figures refer to the past and past performance is not a reliable indicator of future performance/results.
Please always read in conjunction with the glossary and the risk information at the end of the document.
Committing across vintage years mitigates entry point risks
Internal Rate of Returns (IRR) by vintage year
Global venture capital Global growth
70% 60%
50%
50% 40%
30%
30% 20%
10%
10% 0%
-10%
-10% -20%
-30%
-30% -40%
-50%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
-50% -60%

2006

2009
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

2007
2008

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Upper Quartile (LP) (%) Median (LP) (%) Lower Quartile (LP) (%)
Upper Quartile (LP) (%) Median (LP) (%) Lower Quartile (LP) (%) Upper Quartile (LP) (%) Median (LP) (%) Lower Quartile (LP) (%)

Global buyout Global secondaries funds

50% 80%
50%
30% 60%
30%
10% 40%
10%
-10% 20%
-10% 0%
-30%
-30% -20%
-50%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

-50% -40%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

Upper Quartile (LP) (%) Median (LP) (%) Lower Quartile (LP) (%)
Upper Quartile (LP) (%) Median (LP) (%) Lower Quartile (LP) (%) Upper Quartile (LP) (%) Median (LP) (%) Lower Quartile (LP) (%)

Source: Refinitiv, Cambridge Associates, UBS, as of 30 Sept 2022. For illustrative purposes only.
Note: Given most funds take a few years for performance to settle, performance of recent vintage years may be less meaningful. 31
Performance figures refer to the past and past performance is not a reliable indicator of future performance / results.
Please always read in conjunction with the glossary and the risk information at the end of the document.
J-Curve Effect: Capital Calls early in fund life, followed by
distributions near the end
Expected Private Equity Capital Calls and Distributions Capital called as a percentage of total commitment
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1 2 3 4 5 6 7 8 9 10 11 12
Years

Capital Distributions as a percentage of total commitment

140%

120%

100%

80%

60%

40%

20%

0%
1 2 3 4 5 6 7 8 9 10 11 12
Years

Source: Burgiss, UBS. Estimates based on the Takahashi Alexander cash flow model. Illustration based on aggressive UHNW alternatives allocation. Assumes an over- 32
commitment strategy of 25% and a target of 25% to private investments.
Achieving target allocation through multi-year commitments
A continuous over-commitment strategy of ~25% of the target allocation can help achieve long-term targets
22%

20%

18%

16%

14%
% of portfolio NAV

12%

10%

8%

6%

4%

2%

0%
1 2 3 4 5 6 7 8 9 10 11 12
Vintage year

No overcommitment

Source: Data as of 30 Sept 2022. Source: Burgiss, UBS. Estimates based on the Takahashi Alexander cash flow model. Illustration based on aggressive UHNW 33
alternatives allocation.
Managing liquidity and maintenance
UHNW Aggressive allocation: 21% allocation target to privates with a continuous over-commitment strategy of ~25%

Expected cash flow pattern of private investments Capital calls are relatively small compared to the
portfolio
Capital calls as a percentage of total portfolio assets
4%

3%

2%

1%

0%
1 2 3 4 5 6 7 8 9 10 11 12
Years

Net outflows as a percentage of total portfolio assets

4%

3%

2%

1%

0%

-1%
1 2 3 4 5 6 7 8 9 10 11 12
Years

Source: Burgiss, UBS. Estimates based on the Takahashi Alexander cash flow model. Illustration based on aggressive UHNW alternatives allocation. Assumes an over- 34
commitment strategy of 25% and a target of 25% to private investments.
Section 4

Appendix
Private markets are expected to provide a higher return than
public markets
Strategic compound return expectations by asset class, UBS Capital Market Assumptions

10.3%

8.9%
8.6%
8.3%
7.8% 7.8%
7.3%
6.3%
5.7%
5.2%
4.4%

US private Private real Global private Buyout Growth equity Venture Private debt Global equity Hedge funds US high yield US investment
equity estate equity capital bonds grade bonds

Source: UBS WM USA Asset Allocation Committee, as of 13 Feb 2023. Strategic compound return Capital Market Assumptions (CMAs). 36
Reported returns for private markets tend to exhibit
smoothing
Comparing UBS CMA for reported return volatility & applying an unsmoothing multiplier

38.6%
Unsmoothed Unadjusted

25.2%
23.3% 23.4% 23.1%
22.0%
19.7% 20.3%

14.6% 13.8% 13.8%

13.1%
10.5% 10.5%
8.3% 8.8%
5.9% 5.9%

Buyout Growth equity Venture capital Secondaries Co-investment Direct lending Distressed credit Core / core + Opportunistic
Private equity Private credit Private real estate

Source: UBS WM USA Asset Allocation Committee, as of 13 Feb 2023. Strategic compound return Capital Market Assumptions (CMAs). Secondaries and co- 37
investment CMA mapped to US Private Equity. Distressed credit CMA mapped to direct lending. Core / core + and opportunistic CMA mapped to private real estate.
Multipliers are based on return data from Cambridge Associates and Cliffwater Direct Lending Index.
Historical correlations

1 2 3 4 5 6 7
1 Global private equity 1.00
2 Global private real estate 0.65 1.00
3 Private debt 0.75 0.62 1.00
4 US equities 0.82 0.53 0.67 1.00
5 Hedge funds 0.88 0.49 0.79 0.89 1.00
6 US fixed income 0.19 -0.07 -0.06 0.24 0.09 1.00
7 US high yield fixed income 0.78 0.42 0.80 0.85 0.87 0.35 1.00

Source: Refinitiv, Cambridge Associates, Morningstar, UBS. Data as of 30 Sept 2022. For illustrative purposes only. 38
Performance figures refer to the past and past performance is not a reliable indicator of future performance / results.
Please always read in conjunction with the glossary and the risk information at the end of the document.
Private markets are gaining importance for UHNW and
family office investors
Private equity is a cornerstone allocation for UHNW and family office portfolios. Interest from less sophisticated investor is
growing.
Strategic asset allocation of family offices 2022
<1%
Infrastructure

1%
Art and
antiques
1%
Commodities

1%
Gold/precious
metals

4% 24%
Hedge Developed
funds markets

12%
2% Real estate 32%
Private Equities
debt

43%
Alternative
asset
8% classes
Funds/
funds of 57%
funds Traditional 8%
asset Developing
21% classes markets
Private
equity

15%
13% Fixed
income
Direct
investments 10% 11%
Cash
Developed
markets

4%
Developing
markets

For illustrative purposes only.

Source: UBS Evidence Lab, GFO report 2022. 39
Performance figures refer to the past and past performance is not a reliable indicator of future performance / results.
Please always read in conjunction with the glossary and the risk information at the end of the document.
Private equity & other private market strategies
Private equity is a heterogeneous asset class with many sub-sectors

Strategies
• Specialize in helping to finance the purchase of established companies
Leveraged buyouts
• Provides a management team with enough equity to make a small down-payment on the purchase
of a business, and then to pay the rest of the purchase price with borrowed money
Venture capital
• Often specialized by investing in a single field or by stage of investing

• Provides a middle level of financing in leveraged buyouts below the senior debt layer and above the
Mezzanine debt
equity layer
• Typically used to help fund the purchase and recapitalization of private, middle-market companies

• Approaches include private equity-type control structures, restructuring strategies as well as hedge
Distressed investing
fund trading
• Increasingly popular with investors undertaking distressed M&A

• Compelling investment opportunities due to the special market or security circumstances or

Special situations investing
company-specific situation, rather than the underlying fundamentals
• Encompasses equity-linked debt, project finance, distressed debt plays, one-time opportunities
resulting from changing industry or government regulations

• Funding that allows firms to undertake expansion activities

Growth capital
• Nature varies, as it exists both as term debt or equity-type investments

40
Structure of private equity funds
Private equity funds typically are structured as private Limited Partnerships

The individual manager(s) of a fund

is referred to as the General
Partner… Limited Partners are the
investors in the fund.

41
Source: UBS. For illustrative purposes only.
Please always read in conjunction with the glossary and the risk information at the end of the document.
Non-traditional assets
Non-traditional asset classes are alternative investments that include hedge funds, private equity, real estate, and managed futures (collectively, alternative investments). Interests of
alternative investment funds are sold only to qualified investors, and only by means of offering documents that include information about the risks, performance and expenses of alternative
investment funds, and which clients are urged to read carefully before subscribing and retain. An investment in an alternative investment fund is speculative and involves significant risks.
Specifically, these investments
1. are not mutual funds and are not subject to the same regulatory requirements as mutual funds;
2. may have performance that is volatile, and investors may lose all or a substantial amount of their investment;
3. may engage in leverage and other speculative investment practices that may increase the risk of investment loss;
4. are long-term, illiquid investments, there is generally no secondary market for the interests of a fund, and none is expected to develop;
5. interests of alternative investment funds typically will be illiquid and subject to restrictions on transfer;
6. may not be required to provide periodic pricing or valuation information to investors;
7. generally involve complex tax strategies and there may be delays in distributing tax information to investors;
8. are subject to high fees, including management fees and other fees and expenses, all of which will reduce profits.
Interests in alternative investment funds are not deposits or obligations of, or guaranteed or endorsed by, any bank or other insured depository institution, and are not federally insured by
the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other governmental agency. Prospective investors should understand these risks and have the financial ability
and willingness to accept them for an extended period of time before making an investment in an alternative investment fund and should consider an alternative investment fund as a
supplement to an overall investment program. In addition to the risks that apply to alternative investments generally, the following are additional risks related to an investment in these
strategies:
• Hedge Fund Risk: There are risks specifically associated with investing in hedge funds, which may include risks associated with investing in short sales, options, small-cap stocks, "junk
bonds," derivatives, distressed securities, non-U.S. securities and illiquid investments.
• Managed Futures: There are risks specifically associated with investing in managed futures programs. For example, not all managers focus on all strategies at all times, and managed
futures strategies may have material directional elements.
• Real Estate: There are risks specifically associated with investing in real estate products and real estate investment trusts. They involve risks associated with debt, adverse changes in
general economic or local market conditions, changes in governmental, tax, real estate and zoning laws or regulations, risks associated with capital calls and, for some real estate products,
the risks associated with the ability to qualify for favorable treatment under the federal tax laws.
• Private Equity: There are risks specifically associated with investing in private equity. Capital calls can be made on short no-tice, and the failure to meet capital calls can result in significant
adverse consequences including, but not limited to, a total loss of investment.
• Foreign Exchange/Currency Risk: Investors in securities of issuers located outside of the United States should be aware that even for securities denominated in U.S. dollars, changes in the
exchange rate between the U.S. dollar and the issuer’s "home" currency can have unexpected effects on the market value and liquidity of those securities. Those securities may also be
affected by other risks (such as political, economic or regulatory changes) that may not be readily known to a U.S. investor.

42
Risk information
UBS Chief Investment Office's ("CIO") investment views are prepared and published by the Global Wealth Management business of UBS Switzerland AG (regulated by FINMA in
Switzerland) or its affiliates ("UBS").
The investment views have been prepared in accordance with legal requirements designed to promote the independence of investment research.

Generic investment research – Risk information:

This publication is for your information only and is not intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product. The analysis contained
herein does not constitute a personal recommendation or take into account the particular investment objectives, investment strategies, financial situation and needs of any specific
recipient. It is based on numerous assumptions. Different assumptions could result in materially different results. Certain services and products are subject to legal restrictions and cannot be
offered worldwide on an unrestricted basis and/or may not be eligible for sale to all investors. All information and opinions expressed in this document were obtained from sources believed
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and opinions as well as any forecasts, estimates and market prices indicated are current as of the date of this report, and are subject to change without notice. Opinions expressed herein
may differ or be contrary to those expressed by other business areas or divisions of UBS as a result of using different assumptions and/or criteria.

In no circumstances may this document or any of the information (including any forecast, value, index or other calculated amount ("Values")) be used for any of the following purposes (i)
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Risk information
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