UBS Urges 20%–40% Alternative Allocation and Warns of 10% Credit Defaults
UBS•UBS recommends investors supplement core holdings with satellite strategies—such as government bonds, gold, and Asian equities—and allocate 20%–40% to alternative assets for diversification and tactical flexibility. It also projects private credit default rates rising from roughly 4.4% to 9%–10% by end-2026, with AI disruption adding up to 4% risk.
1. Dynamic Portfolio and Satellite Strategy
The UBS report emphasizes building a core portfolio of equities, fixed income and alternatives, while adding satellite allocations for tactical opportunities and risk management. Recommended satellite assets include government bonds, gold, inflation-linked debt, put-option strategies and targeted regional exposures like Asian equities, with a suggested 20%–40% allocation to alternative investments subject to liquidity and risk tolerance.
2. Private Credit Default Risk Outlook
UBS forecasts private credit default rates climbing from about 4.4% today to between 9% and 10% by end-2026, noting AI-related disruption could add 3%–4% more risk. The report highlights varied stress across credit markets, growing leverage in private credit and private equity ecosystems, and potential spillover effects into broader corporate financing conditions.
