UBS Fund Services has won the three-year overall performance award and several sector awards. Over three years, its sector awards are for US equities, European fixed income and the defensive, dynamic and neutral categories of the asset allocation fund class. UBS has also received the award for US dollar fixed income over 10 years. Asset allocation can refer to both a process and a category of fund: as a process, asset allocation is the selection of country, stock or currency weightings for a fund, while an 'asset allocation fund'' is a kind of balanced portfolio where the composition is set by the client. They can be biased in favour of equities or fixed income as the client requires. Teh-Hsiu Fu, head of the Greater China office for UBS Global Asset Management, says his company offers a diverse range of unit trust products in Hong Kong. Being a big manager with a wide range of products is a prerequisite to be in the running for the overall winner award. 'We like to describe ourselves as having a price/intrinsic value type of philosophy, in terms of looking for investment opportunities. We believe the market price ultimately reflects the present value of future cash flows for the investment position we are looking at. 'When we look at different investment opportunities around the world, we use a consistent global evaluation model that utilises this price/intrinsic value philosophy.'' UBS looks for opportunities where its assessed intrinsic price of an investment vehicle such as a stock varies considerably from its market value underpriced investments. 'We hope to find investment opportunities by looking at the difference between price and market value at every level: at the stock level, the region, country, industry and currency level.'' Asset allocation and other investment parameters are set within UBS Global Asset Management and communicated through an integrated intranet platform according to a globally consistent platform. 'All the investment personnel share their research information on a global basis. We ensure our analysts around the world share the same models and assumptions. This ensures the feedback in terms of the results they provide is consistent around the world. Asset allocation is done by utilising the resources we have in different markets and financial centres.'' Mr Fu's area of special responsibility is Greater China: the Hong Kong, China and Taiwan markets. 'Obviously, we think there are great opportunities in these markets. We look at regional fund distribution, we look at institutional account management if it is relevant, and we are also keen on the opportunities developing in China.'' Any manager capable of winning one of the overall group awards in volatile markets such as in the past three years must be familiar with risk management and trading in turbulent market conditions. Mr Fu says risk is an accepted part of the investment equation: a certain amount of risk taking is required to generate returns. 'One of our strengths is our company as a whole puts a strong focus on risk control. We have a proprietary-developed risk-management system that is used globally by our investment professionals. We are looking for added value in our investment portfolios and therefore we take active risks. 'But the risk-control tool enables us to measure the risk we are taking, so we do not take unintended risks, and so the risk we take is rewarded adequately. The tool we have enables portfolio managers to analyse the risk in their portfolios and make sure that we have the right risk/return profile.'' Mr Fu says many factors are entered into the UBS risk model, including measures of historic volatility. 'Our proprietary risk model looks at forward-looking assumptions based on various inputs. So on our intranet, our portfolio managers and analysts can play around with different assumptions in building up their portfolios and look at the risk profile of different assumptions. 'They can see how changes in assumptions will impact on the risk of various portfolio structures. So when constructing a portfolio, we can take risk into account in the process. This is something which differentiates us from some of the competition.'' The same investment philosophy that guides UBS in stock markets around the world is applied to the fixed-income markets, which recently out-performed major stock markets by a big margin. Mr Fu says about half of UBS Global Asset Management's US$400 billion in assets under management is in fixed income. 'The rest is in equities, asset allocation funds and alternative investments. Depending on the client's risk profile, the asset allocation funds can be higher in equities or fixed income. 'Our investment philosophy is the same across asset classes, so the same intrinsic price approach applies to fixed income. Of course, in fixed-income research you need to look at different factors such as the duration, yield curve and the risk you are prepared to take with interest rates and so forth. But the underlying assumptions driving fixed-income research are the same as in other asset classes.'' Mr Fu said the year would be challenging for asset managers. 'We are a really research-driven organisation. I think the challenge for us is to ensure the quality of our research, so we can identify the structural changes in the market and factor that into our valuation process. Another challenge is to ensure all the investment information we acquire is shared among our various investment teams around the world so we can consistently add value to our investment products.''