With uncertainties over Covid-19 recoveries and sporadic volatility in the market, investors may find it difficult to position their investments in line with market conditions, for example shifting from a growth-oriented stance to a more conservative one, and vice versa.
So how can investors effectively navigate market shifts while avoiding pitfalls like mistiming?
Diversification has long been a mainstay in professional investors’ toolboxes to manage volatility by having exposures to a variety of sources of returns. For example, equities and bonds generally complement each other, potentially improving a portfolio’s risk/return profile. Actively managed, this diversified portfolio may offer flexible positioning in line with market conditions.
PineBridge Investments’ Acorns of Asia Balanced Fund, which invests in fast-growing Asian equities and Asian bonds, primarily denominated in Singapore dollars (SGD), aims to fill these needs.
The equity component in this portfolio focuses on Asian companies that have tremendous growth potential to generate sustainable earnings over the long run, while the fixed income component may provide a buffer during volatile markets.
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“As the saying goes, great oaks from little acorns grow,” says Elizabeth Soon, Head of Asia ex Japan Equities at PineBridge Investments and co-manager of the portfolio. “Our strategy offers exposure to a diversified portfolio of fast-growing companies that are poised to gain market share over the long run and capitalise on the region’s secular trends, such as digitalisation, rising wealth and consumption, environmental, social and governance (ESG); and urbanisation.”
Soon has over 30 years of experience in Asia’s asset management industry1. At PineBridge, she also manages the firm’s Asia ex Japan small cap and India equity strategies.
Bond portion provides a buffer
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The SGD bond portion, managed by Senior Portfolio Manager Omar Slim in Singapore, offers a strong ballast against volatility and disruptions through careful credit selection of high-quality issuers. Slim, who has 19 years of experience in the industry1, navigates across sectors, ratings, and durations to find attractive income opportunities.
“Despite recent Covid-19 setbacks, we believe that Singapore is still well positioned for a strong 2021 recovery. The accelerated vaccination program and strong take-up should signal a faster reopening of certain pockets of the economy in the fourth quarter. We expect corporate earnings to show further signs of recovery in the upcoming reporting cycle,” says Slim.
Singapore’s top AAA sovereign rating, a stable monetary regime and underlying currency provide comfort for investors during choppy global markets.
PineBridge has a long history of active investing in Asia. Previously the asset management division of insurance firm AIG before becoming an independent firm in 2010, the firm has been managing Asian equities since the early 1990s.
As at 30 June 2021, the firm managed US$141.4 billion across global asset classes for investors worldwide.
Equity portion focuses on long-term growth
The Asia equity market has remained resilient throughout the pandemic, thanks to pent-up demand for goods and services, and a digitalisation-led impulse. Over the long term, Soon expects structural trends such as digitalisation, urbanisation, ESG and others will drive corporate earnings.
“We believe the pandemic will recede sooner rather than later, but that its impacts will reverberate for years to come,” she reasons. “Thus, in the post-Covid world, we may see a significant pivot in resource and capital allocation. We expect front-loading of many initiatives across Asia in areas such as smart infrastructure (including healthcare infrastructure), increased investments in digitisation and automation, and a greater focus on environmental imperatives – all of which embody regional secular trends that could have a meaningful impact on Asia’s equity markets.”
The fund’s equity holdings include companies from a variety of industries that are believed to be well positioned to benefit from these accelerating trends. Meanwhile, the fixed income portfolio is largely invested in Singapore government bonds and investment grade issuers.
Active investing is key
Key to the fund’s security selection is a research-driven fundamental, bottom-up approach, which is driven by a dedicated team of analysts and portfolio managers across Asia, complemented by global industry specialists. Managing amid uncertainty such as the pandemic has honed the team’s focus on fundamentals and patience, says Soon.
“Crisis brings up opportunities. Throughout this period, we focused on companies that survived the crisis and actually gained market share on long-term basis,” Soon explains.
Risk management, which may not be easily accessible to retail investors, is integrated throughout the fund’s investments process, including the ESG assessments of issuers and companies.
“We measure all sorts of risks, the most important of which are credit, interest rate, and liquidity risks. All three are constantly present, and we engage in robust credit research as well as simulations and stress tests to make sure the portfolio is protected in a diverse set of scenarios,” says Slim.
With the Covid-19 still continuing to be headwind for investors in Asia, an active, balanced approach may offer an alternative strategy for the dilemma of market timing -- remaining invested for growth while minimising downside risks.
For more information on PineBridge Investments' Acorns of Asia Balanced Fund, click here.
1As of June 30, 2021
Disclaimer
This document is not an offer or solicitation to purchase or sell units of the PineBridge International Funds - Acorns of Asia Balanced Fund (the “Fund”). Investors should read the prospectus and product highlights sheet of the Fund, available from PineBridge Investments Singapore Limited (the “Manager”) and its authorized distribution partners, for further details including the risk factors before investing in the Fund. The value of the units in the Fund and the income accruing to the units, if any, may fall or rise. Past performance may not be a reliable guide to future performance. Any prediction, projection or forecast on the economy, securities markets or the economic trends of the markets targeted by the Fund are not necessarily indicative of the future or likely performance of the Fund. An investment in the Fund is subject to risks, including the possible loss of principal amount invested. The Fund may use or invest in financial derivatives for efficient portfolio management and hedging purposes. Investments in the unit trusts are not deposits or other obligations of, or guaranteed or insured by the Manager or any of its related corporations. This document does not constitute investment advice or recommendation and was prepared without any regard to the specific investment objectives, financial situation or the particular needs of any person. Investors may wish to seek advice from a financial adviser before making a commitment to invest in units of the Fund. In the event an investor chooses not to seek advice from a financial adviser, the investor should consider whether the Fund is suitable for him. The portfolio holdings mentioned herein are subject to change and are not intended to be a recommendation to buy or sell a security or an indication of the performance for the subject company/issuer. The information contained herein is based on sources that the Manager believes to be accurate and reliable at the date it was made, and there is no guarantee or warranty on its accuracy or completeness. Investors should not act on it without first independently verifying its contents. Any opinion or estimate contained in this document is subject to change at any time without notice. The Manager and its related corporations together with their respective directors and officers may have or may take positions in the securities mentioned in this documentation and may also perform or seek to perform broking and other investment services for the corporations whose securities are mentioned in this documentation as well as other parties. PineBridge Investments is a group of international companies that provides investment advice and markets asset management products and services to clients around the world. PineBridge Investments is a registered trademark proprietary to PineBridge Investments IP Holding Company Limited. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. Issued by PineBridge Investments Singapore Limited, located at One George Street, Unit 21-06, Singapore 049145 (Company Reg. No. 199602054E). All rights reserved.
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