To The Moon

“Turbulent” would perhaps be the word to describe the global market this year. Market participants reacting to a slew of news development, both good and bad saw assets re-price sharply, leading to much pain felt in one’s portfolio. In this vein, we launched the UT Starter Pack on Fund Mall on 8th July 2022 to allow investors on our platform to essentially build a portfolio that consists of four different funds that have been cherry-picked to weather the current macroconditions.

By investing in the UT Starter Pack, investors will automatically have a portfolio that is geographically diversified and hold exposure to various asset classes. Additionally, the UT Starter Pack also places a heavy emphasis on Environmental, Social and Governance (ESG) qualities that seek to generate superior returns over the long-term investment horizon. Now that we have a better understanding of what the UT Starter Pack is, we will be looking at the performance of the underlying funds in the following section.

Chart 1: Our UT Starter Pack funds’ performance. Source: Bloomberg

Fidelity America A fund SGD

Worries about inflation, monetary policy, currency movements and a bevy of other factors saw US equities grinding lower to start the month. However, a turnaround was witnessed as the month progressed. A better-than-expected start to the 3Q earnings season, marginally lower inflation readings compared to the month prior and GDP prints that came in above consensus forecast uplifted market participants’ and fuelled hopes that the Feds will moderate its hiking cycle.

Chart 2: US CPI YoY have hit levels not seen in years but appears to be slowing. Source: Bloomberg

Hence, the Fidelity America A fund SGD that invests principally in US equity securities and at least 50% of the net assets invested in securities with the ability to maintain sustainable characteristics was able to register substantial gains for investors this month as markets cheered on the positives that were evident in the market place. Notably, the fund has also outperformed the broad US market as gauged by the S&P500 Index by a fair margin. We believe that this is due to the fact that the fund is overweight in the healthcare sector which holds a defensive tilt as well as the financial and energy sector which are prime beneficiaries in the prevailing market terrain.

Chart 3: Fund performance vs S&P500. Source: Bloomberg

Blackrock ESG multi-asset fund

Before we dive deeper and uncover the rationale behind the performance of the fund, we will explain what a multi-asset fund is. A multi-asset fund offers exposure to a broad range of asset classes, often offering a new level of diversification typically associated with institutional investing. Multi-asset funds may invest in a number of traditional equity and fixed-income strategies, index-tracking funds, financial derivative and alternative investments. This diversity allows portfolio managers to potentially balance risks with reward and deliver steady, long-term returns for investors particularly in volatile markets.

Now that you have a clearer understanding of what a multi-asset fund is, let us touch on the performance of the fund. Delving deeper under the hood leaves us with a finding that the fund is heavily overweight in US equities – as mentioned in the earlier section, US equities enjoyed a good month of returns. Hence, the Blackrock ESG multi-asset fund which invests in multiple assets consistent with principles of ESG have stood to gain. Having mentioned that, investors may be wondering why the fund recorded a softer return as compared to the US-focused fund. In our view, this is likely due to the stronger performance of US equities being offset by the poorer performance of other asset classes within the portfolio.

United Singapore Growth fund

Singapore’s economy is benefitting from the post-pandemic reopening both at home and abroad – the latest economic data reported spells positive. Growth has picked up in 3Q after contracting the previous quarter and the labour market continues to tighten, an encouraging sign. That said, the outlook for the nation going ahead appears sanguine as well. As tourism continues to gather momentum, a fall in unemployment and a rebound in services is expected.

Nonetheless, the main factor that is driving Singapore’s equities performance is the tighter monetary conditions we are in today. Our view is built on the fact that the STI Index has a sector weighting of almost 50% in the financial Sector. In a world where rates are on an upward trajectory, Singapore included, it spells positive for banks as higher rates can lead to higher net interest margins and therefore an expansion in profitability. Therefore, the United Singapore Growth Fund with an investment objective to achieve medium to long-term capital appreciation and to receive regular income distribution during the investment period through investing in shares of companies listed or quoted on the Singapore Exchange has benefitted – the financial sector makes up almost half of the fund sector weighting, akin to the STI Index.

Chart 4: Singapore interest rates have risen sharply over the course of the year. Source: Bloomberg

Chart 5: History suggests that financials tend to perform well during periods where rates are high. Source: Bloomberg

Aberdeen China A shares sustainable equity fund

China is plagued with numerous challenges and the outlook for the nation going forward is bleak. Firstly, the still distressed property is battering growth. Secondly, with Covid case counts showing no signs of abating, hopes that an end to the Covid-Zero policy imposed is just round the corner have been shattered. In essence, the twin headwind dragging down growth does not bode well for the economy and has soured the sentiments of market participants in spite of valuations correcting significantly. For that reason, the Aberdeen China A share sustainable equity fundaiming to seek a combination of growth and income by investing in China-listed companies handed investors hefty losses.

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