Consider capital preservation

18 September 2026, 12:42 UTC Chief Investment Office GWM Investment Research

Consider capital preservation Consider capital preservation Author: Sagar Khandelwal, Strategist, UBS Switzerland AG

• Why? 1) Investors do not have to choose between pursuing gains and protecting against losses. 2) Capital preservation strategies can help limit losses while retaining participation in further market gains. 3) Combining diversified core equity exposure with tailored capital preservation approaches can help build a more resilient portfolio over time.

• Why now? 1) Investors with concentrated portfolios, lower tolerance for drawdowns, or near-term liquidity Capital preservation strategies can reduce drawdown needs may wish to strengthen portfolio resilience risk while retaining some participation in further equity- without stepping away from long-term investment market gains. Source: Jason Leung_Unsplash opportunities. 2) Capital preservation strategies can help investors balance participation in potential gains with greater protection against adverse scenarios. 3) The current interest-rate environment continues to support the attractiveness of many conventional capital preservation strategies.

Investors can make their portfolio more resilient to potential tailored by tenors, the level of downside protection, and the adverse scenarios by incorporating strategies designed to participation rate, allowing investors to select an approach help limit losses while retaining participation in potential that reflects their objectives and risk tolerance. gains. This may be particularly relevant for investors with concentrated portfolios, lower tolerance for drawdowns, or Taking advantage of relatively low implied volatility near-term liquidity needs. Capital preservation approaches Relatively low implied volatility can make capital can strengthen portfolio resilience while allowing investors preservation strategies more attractive. High stock-level to maintain some upside exposure. dispersion and low correlations, particularly in US and Eurozone markets, have helped keep index-level volatility Locking in gains while retaining participation relatively subdued. Lower implied volatility can reduce the Following strong equity-market gains, investors with cost of the options used in capital preservation strategies, concentrated positions may want to lock in some potentially supporting greater participation in market gains. gains while retaining exposure to a further rally. Capital preservation strategies can help limit losses while The move higher in many governments’ shorter-dated bond maintaining participation in potential market gains, whether yields can make zero-coupon structures cheaper, increasing linked to individual stocks or broader equity indices. the capital available for options and potentially supporting greater participation in market gains. However, investors Derisking while maintaining exposure should monitor implied volatility, as higher option prices Investors with holdings that are richly valued, cyclical, or can reduce participation rates. Investors may also need to vulnerable to market shocks can consider reducing risk by hold these strategies to maturity to receive the contractually diversifying across regions or using strategies designed to specified repayment, which remains subject to the issuer’s provide loss limitation. Capital preservation strategies can be creditworthiness.

This report has been prepared by UBS Switzerland AG. Please see important disclaimers and disclosures at the end of the document.

Global asset class preferences definitions The asset class preferences provide high-level guidance to make investment decisions. The preferences reflect the collective judgement of the members of the House View meeting, primarily based on assessments of expected total returns on liquid and commonly known indices, House View scenarios, and analyst convictions over the next 12 months. Absolute view Attractive: We consider this asset class to be attractive. Consider opportunities in this asset class. Neutral: We do not expect outsized returns or losses. Hold longer-term exposure. Unattractive: We consider this asset class to be…