Top Fund Ideas

4th Quarter 2016

Suitable for: Balanced / Growth / Aggressive

BlackRock Global Multi-Asset Income Fund (SGD-H)
Ride out potential turbulence ahead with multi-asset strategies

The unexpected Brexit vote in June taught us a painful lesson in complacency and the importance of not ignoring political risks. The U.S. Presidential election on 8 November is one such obvious risk. A Clinton victory would be favourable for markets and remains the most likely outcome, although the race has tightened. A Trump victory carries a higher risk of policy uncertainty. Beyond the U.S., the upcoming Italian constitutional referendum, German and French elections in 2017 and Brexit negotiations slated to begin by April next year underscore the importance of defensiveness and selectivity within an overall balanced portfolio. To deal with such turbulence, we advocate diversification across a variety of asset classes to spread out investment risks and mitigate downside pressures. Multi-asset strategies are particularly useful in this regard.

Past performance
1Y
-0.28%
3Y
2.60%
5Y
N.A.
Why We Like the Fund

With markets poised to become more turbulent, the fund’s focus on managing volatility whilst adopting a flexible and unconstrained approach to delivering consistent income may be particularly useful for investors. The fund allows investors access to a large variety of asset classes including non-traditional assets such as preferred stocks, listed master limited partnerships and real estate vehicles, aside from the conventional stocks and bonds. Investors are thus able to invest in a portfolio that is highly diversified across both asset classes and regional exposure. The fund offers an average pay-out of 5 to 6 per cent per annum, which is not guaranteed and may rise or fall.

About the Fund
Current NAV
S$9.29
Inception Date
31 July 2013
Fund Size
US$3,920.73 mil
Annual Management Fee
1.50% p.a.
Subscription Modes
Cash
Top 5 Holdings
%
iShares $ High Yield Corporate Bond
2.29
BGF USD High Yield Bond FD D3 USD
1.37
iShares $ Corporate Bond UCITS ETF
0.90
Treasury Note (OTR) 0.75 08/15/2019
0.35
EMERA INC. 6.75 06/15/2076
0.32
NAV Movement
nav movement

Source: NAV chart based on Bloomberg data as at 11 October 2016; fund information extracted from the fund’s factsheet provided by BlackRock Investment Management was as at 31 August 2016.

Asset Allocation
sector allocation

Note: Performance as at 31 August 2016, calculated on an offer-to-bid basis with all dividends and distributions reinvested, net of all charges payable upon reinvestment, if any. Performance figures exceeding 1 year, if any, were stated on an average annual compounded basis.

Suitable for: Balanced / Growth / Aggressive

Fullerton USD Income Fund (SGD-H)
Minimise single issuer risk with a diversified portfolio of bonds

Accommodative monetary policy should continue to be salutary for fixed income, which has delivered solid returns over the past year. While we expect bonds to continue to deliver strong performance moving forward, we believe returns will likely be driven more by income than capital appreciation. However, we would caution investors to be more circumspect and selective when investing in fixed income securities as the current risk-on environment along with the insatiable hunger for yield among investors tend to draw out increasingly low quality issuers eager to find an audience for their bond issues. In addition, given the spate of bond defaults in the domestic oil and gas sector, we urge investors to minimise single issuer risk by investing in an actively managed diversified portfolio of carefully selected bonds. This would be a more cost-effective option than having to construct a fully diversified portfolio of at least 30 different credit names.

Past performance
1Y
N.A.
3Y
N.A.
5Y
N.A.
Why We Like the Fund

The fund’s investment strategy requires at least 70 per cent of the portfolio to be invested in investment grade fixed income securities. These bonds should hold a minimum long-term credit rating of BBB- by Fitch, Baa3 by Moody's or BBB- by Standard & Poor's (or their respective equivalents). In addition, the fund manager has the flexibility to opportunistically invest up to 30 per cent of the portfolio in non-investment grade securities to enhance portfolio returns. The manager aims to invest at least 50 per cent of the fund in U.S. Dollar denominated bonds whilst also aiming to provide regular quarterly income to investors with lower volatility relative to other asset cases. With this fund, investors will be able to access a highly diversified portfolio of high quality fixed income assets that is robustly constructed and actively managed.

About the Fund
Current NAV
S$1.03
Inception Date
15 April 2016
Fund Size
S$545.40 mil
Annual Management Fee
1.00% p.a.
Subscription Modes
SRS / Cash
Top 5 Holdings
%
Commonwealth Bank Aust 1.66933% Sep 2021
2.2
Capitaland Treasury Ltd 4.076% Sep 2022
1.9
Pertamina Persero Pt 4.875% May 2022
1.4
Ck Bond Sec Ltd 5.125% Sep 2049
1.3
Perusahaan Penerbit SBSN 3.4% Mar 2021
1.2
NAV Movement
nav movement

Source: NAV chart based on Bloomberg data as at 11 October 2016; fund information extracted from the fund’s factsheet provided by Fullerton Fund Management was as at 31 August 2016.

Country Allocation
sector allocation

Note: Performance as at 31 August 2016, calculated on an offer-to-bid basis with all dividends and distributions reinvested, net of all charges payable upon reinvestment, if any. Performance figures exceeding 1 year, if any, were stated on an average annual compounded basis.

Suitable for:Balanced / Growth / Aggressive

Schroder Asian Equity Yield Fund
Asia ex-Japan stocks lead global bourses amid Fed caution

Asia ex-Japan stocks continue to lead developed market equities as an overly cautious Federal Reserve provided some relief over the past few months. Stable macro-economic fundamentals along with a pick-up in forward earnings for Asian corporates should continue to buoy investor sentiments moving forward. However, we remain cautious of the prevailing risks in the region including Fed policy and China’s economic rebalancing. With ample current account surpluses, large foreign exchange reserves and floating exchange rates, Asian economies should be well-positioned to absorb these external shocks, but we would still prefer to err on the side of caution by investing in a diversified portfolio of high quality dividend yielding Asian stocks. An income-biased investment strategy should offer some security during periods of higher expected volatility.

Past performance
1Y
1.1%
3Y
4.7%
5Y
6.8%
Why We Like the Fund

The fund manages a diversified portfolio of high quality dividend yielding Asia ex-Japan stocks that are grouped according to three distinct dividend classes. The first focuses on companies that are able to deliver a steady stream of income secured by stable earnings. The second comprises of companies that offer rising dividend streams driven by improving payout ratio. The third relates to companies that deliver a rising stream of dividend payments supported by growth in earnings. The fund’s active allocation across these three distinct dividend classes in accordance to prevailing market conditions has been particularly successful, enabling the fund to provide investors with regular pay-out of 3 to 4 per cent per annum, paid monthly.

About the Fund
Current NAV
S$1.04
Inception Date
11 February 2005
Fund Size
S$354.1 mil
Annual Management Fee
1.50% p.a.
Subscription Modes
CPFIS-OA/ SRS / Cash
Top 5 Holdings
%
Jardine Strategic Holdings
3.5
Samsung Electronics
3.4
ASX
3.4
Taiwan Mobile
3.3
Swire Properties
3.2
NAV Movement
nav movement

Source: NAV chart based on Bloomberg data as at 11 October 2016; fund information extracted from the fund’s factsheet provided by Schroder Investment Management was as at 31 August 2016.

Sector Allocation
sector allocation

Note: Performance as at 31 August 2016, calculated on an offer-to-bid basis with all dividends and distributions reinvested, net of all charges payable upon reinvestment, if any. Performance figures exceeding 1 year, if any, were stated on an average annual compounded basis.

Suitable for:Balanced / Growth / Aggressive

Schroder Asian Income Fund (SGD)
Asia still resilient to the troubles of the developed world

Economic progress in Asia still looks solid in the face of sluggish growth in the developed world and troubles in China. The internally-driven dynamism that has been the feature of the past few years should continue to deliver growth of around 5 per cent in ASEAN. Ample current account surpluses, large foreign exchange reserves and floating exchange rates should provide adequate buffers against external events. While Asia ex-Japan stocks continue to trade at a significant discount to its developed market peers, valuations for the region are no longer cheap versus its own historical levels. Also, economic rebalancing in China and Fed policy remains two prevailing risks which may affect Asian market performance. To mitigate these potential downside risks, investors should consider a multi-asset strategy approach when seeking exposure to investment opportunities in Asia.

Past performance
1Y
4.6%
3Y
5.9%
5Y
N.A.
Why We Like the Fund

Through the fund, investors will be able to access a diversified, multi-asset portfolio consisting of both Asian equities and Asian fixed income investments. Investors can also benefit from the fund’s active asset allocation strategy, which seeks to maximise the yield and total return of the portfolio across different market environments. Also, the fund’s defensive position with a focus on capital preservation is particularly useful amid prevailing political uncertainties hanging over markets, especially in Europe and the U.S. At the same time, investors can gain from attractive potential payouts on a monthly basis of about 5 per cent per annum.

About the Fund
Current NAV
S$1.15
Inception Date
21 October 2011
Fund Size
S$2,280.6 mil
Annual Management Fee
1.25% p.a.
Subscription Modes
SRS / Cash
Top 5 Holdings
%
Link REIT
2.2
HK Electric Investments & HKE
2.1
Mapletree Commercial Trust
2.0
Telstra Corp
1.9
National Australia Bank
1.9
NAV Movement
nav movement

Source: NAV chart based on Bloomberg data as at 11 October 2016; fund information extracted from the fund’s factsheet provided by Schroder Investment Management was as at 31 August 2016.

Sector Allocation
sector allocation

Note: Performance as at 31 August 2016, calculated on an offer-to-bid basis with all dividends and distributions reinvested, net of all charges payable upon reinvestment, if any. Performance figures exceeding 1 year, if any, were stated on an average annual compounded basis.

Suitable for:Balanced / Growth / Aggressive

JPMorgan Global Macro Opportunities Fund (SGD-H)
Cushion your portfolio with low correlation liquid alternatives

Political risks loom large as the U.K. prepares to negotiate the terms of exit with EU leaders while the U.S. and a number of other major Eurozone powers such as Germany and France go to the polls. Brexit negotiations and the rise of populism in Europe could engender more volatility ahead due to heightened uncertainty of policy implications. As these economic and political outcomes are difficult to predict, a good strategy would be to remain attentive to potential non-consensus and financially detrimental event risks. Such uncertainties would also underscore the need to construct a diversified, multi-asset and income generating portfolio to tide through potential volatility ahead. In doing so, investors should consider buffering their portfolios with useful shock absorbers, such as low correlation investment strategies or liquid alternatives that have the flexibility to implement strategies across a broader range of markets and financial instruments.

Past performance
1Y
N.A.
3Y
N.A.
5Y
N.A.
Why We Like the Fund

This multi-asset and liquid alternative fund has the flexibility to invest in traditional assets like equities and fixed income, but also wields a toolkit of derivatives - non-traditional assets such as options and futures – which enable the fund to take long or short positions in currencies and other assets to generate returns in accordance to different market conditions. Active allocation between traditional (stocks and bonds) and sophisticated instruments (futures and options) also allows the fund to lower correlations within its own portfolio. This flexible and unconstrained approach has allowed the fund to generate positive returns in all 12-month periods since it altered its strategy in November 2012.

About the Fund
Current NAV
S$9.60
Inception Date
11 January 2016
Fund Size
US$7,208.1 mil
Annual Management Fee
1.25% p.a.
Subscription Modes
Cash
Theme Risk Breakdown
%
Low inflation
18.5
China in transition
17.2
Europe gradual growth recovery
16.6
U.S. economic strength
14.1
Supply side weakness
10.4
NAV Movement
nav movement

Source: NAV chart based on Bloomberg data as at 11 October 2016; fund information extracted from the fund’s factsheet provided by JP Morgan Asset Management was as at 31 August 2016.

Country Allocation (Equity)
sector allocation

Note: Performance as at 31 August 2016, calculated on an offer-to-bid basis with all dividends and distributions reinvested, net of all charges payable upon reinvestment, if any. Performance figures exceeding 1 year, if any, were stated on an average annual compounded basis.

Suitable for: Balanced / Growth / Aggressive

LionGlobal Short Duration Bond Fund
With Fed rate hikes in view, go for shorter duration bonds

Guidance from the mid-September Fed policy meeting reinforced our view that the next rate hike will likely come in December this year, with another two increases in 2017. In this scenario, we see 10-year Treasury yields rising to about 1.75 per cent by year end, with further modest increases in 2017. This should mean that investment grade bonds can offer slightly better returns than cash over the next six months. We also advise investors to hold bonds with shorter tenors as such instruments tend to be less sensitive to increases in interest rates. Within the bond space, we continue to advocate a diversified portfolio position that is modestly short in duration. Bond funds are a good way for investors to access such portfolios at a fraction of the cost and effort required to construct one individually.

Past performance
1Y
-1.4%
3Y
1.9%
5Y
2.3%
Why We Like the Fund

The fund’s focus on short duration bonds means investors are less exposed to a rising interest rate environment risk. It also addresses investors’ conservative low-return dilemma by aiming to deliver payouts of around 2.5 per cent per annum. To guard against credit risk, investors are exposed to a diversified portfolio of investment grade corporate bonds, issued mainly by Asian corporates. The fund is included in the Central Provident Fund Investment Scheme, and will potentially pay investors a non-guaranteed quarterly payout as a form of regular income.

About the Fund
Current NAV
S$1.66
Inception Date
22 March 1991
Fund Size
S$296.1 million
Subscription Modes
CPFIS-OA/ CPFIS-SA/ Cash / SRS
Top 5 Holdings
%
DBS Capital Funding II VAR PERP (15/06/2018)
6.4
ALIBABA GROUP HOLDINGS LTD 3.6% 28/11/2024
3.4
ICBC Asia LTD EMTN (REG S) VAR 10/10/2023
2.7
ASCENDAS HOSPITALITY TRU SER MTN 3.3% 07/04/2020
2.4
CAPITALAND LTD SER CAPL CONV 2.95% 20/06/2022
2.3
NAV Movement
nav movement

Source: NAV chart based on Bloomberg data as at 11 October 2016; fund information extracted from the fund’s factsheet provided by Lion Global Investors Limited was as at 31 August 2016.

Country Allocation
sector allocation

Note: Performance as at 31 August 2016, calculated on an offer-to-bid basis with all dividends and distributions reinvested, net of all charges payable upon reinvestment, if any. Performance figures exceeding 1 year, if any, were stated on an average annual compounded basis.

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