Top Fund Ideas

3rd Quarter 2017

Suitable for: Balanced / Growth / Aggressive

Lion-OCBC Global Core Fund
Start right with low cost and diversified investment solutions

As is common knowledge to most, a great building cannot be built on weak foundations. Likewise, a high-performing, robust and stable long-term investment portfolio is only viable with a strong core component in place. Often this would constitute a portfolio of investments that traverses multiple asset classes and regional exposure. Much like a solid foundation to a high-rise building, asset and regional diversification help investors weather volatile market conditions and mitigate potential downside risks while providing participation and exposure to the possible market upsides. Admittedly, an investor could construct such a diversified portfolio individually by investing in many singlel securities across numerous asset classes. But such an exercise could prove to be prohibitively costly especially if one sought to replicate the type of multi-asset strategies employed by reputable fund managers. A more cost-effective method would be to invest in liquid investment solutions such as multi-asset unit trusts or even index funds (ETFs). This should provide a sound base from which to layer other more nuanced and narrow investment strategies that could help enhance investment returns. These investments could come through funds that adopt strategies complementary to the core portfolio which could help intensify the benefits of active management, diversification and low volatility.

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

The Lion-OCBC Global Core fund is a low cost, Exchange Traded Funds-based (ETF-based) investment solution that is diversified globally and across multiple asset classes. The portfolio is rebalanced on a regular basis to stay relevant and adjust to changing market conditions. Two portfolio types – Moderate and Growth – seek to provide a sustainable level of income and moderate medium- to long-term capital growth within a target level of portfolio risk and volatility measured over the long-term. This concept of a fund of ETFs and relatively less active management allows the fund manager to charge investors a lower fee. Low cost diversification via such an investment proposition provides a solid foundation upon which investors could build on, perhaps through the addition of more nuanced or exotic strategies that complement their core holdings. This could help further enhance returns over the long term. In terms of income, investors can look forward to potential quarterly payouts through investments in this fund as well. The Moderate and Growth funds offer payouts of about 3.5 per cent and 4.5 per cent per annum respectively. However, it is important to note that these distributions are not guaranteed and may be changed at the fund manager’s discretion without prior notice.

About the Fund
Initial Offer Period Price
S$1.00
Inception Date
1 August 2017
Fund Size
N.A.
Annual Management Fee
0.6% p.a.
Subscription Modes
Cash, SRS(for SGD-H share class)

The fund’s NAV, top holdings and asset allocation were not available at the time of printing. These details will be available after the fund starts trading on 1 August 2017.

Suitable for: Balanced / Growth / Aggressive

Lion-Bank of Singapore Asian Income Fund
Asia: Smooth so far, but beware rocky terrain ahead

The rebound in global trade flows and industrial production activity have benefitted most major Asian economies in 1H2017. First quarter GDP growth across many Asian economies had surprised on the upside while export data and Purchasing Manager Indices (PMIs) continue to paint a fairly rosy macro picture of the region. However, risks to the outlook remain in the form of tighter global financial market conditions arising from the withdrawal of monetary support by most major developed market central banks, a possible shift towards protectionism by key trade partners and a potentially bumpier-than-expected transition in China. As such, for an investor looking to gain exposure to a region that seems pregnant with long-term promise yet troubled by near-term risks, investing in an actively managed, diversified portfolio of assets can be useful to mitigate potential downside risks relative to investing in a fully concentrated equities-only portfolio.

Past performance
1Y
7.7%
3Y
N.A.
5Y
N.A.
Why We Like the Fund

The fund invests in Asia through a flexible multi-asset approach, which helps to reduce overall portfolio volatility. Following a Tactical Asset Allocation framework devised by the Bank of Singapore - OCBC’s private banking arm - the fund is able to adjust the size of its market participation by actively tweaking the composition of its holdings to either defend itself against downside risks or ride on favourable market conditions to generate returns. Investors may benefit from a potentially stable and regular income stream, derived from traditional stocks and bonds as well as option fee premiums. The latter arises from the ability of the fund to write covered call options - or take active bets against overvalued stocks - giving the fund an edge over its competitors in terms of delivering income.

About the Fund
NAV as at 7 July 2017
S$1.10
Inception Date
2 February 2016
Fund Size
US$264.3 mil
Annual Management Fee
1.2% p.a.
Subscription Modes
Cash/ SRS(SGD-Hedged share class)
Top 5 Holdings
%
TENCENT HOLDINGS LTD
2.9
SAMSUNG ELECTRONICS
2.9
GLOBAL LOGISTIC PROPERTIES LTD
2.5
ALIBABA GROUP HOLDING LTD SP ADR
2.3
ZTE CORP H
2.3
NAV Movement
nav movement

Source: NAV chart based on Bloomberg data as at 7 July 2017; fund information extracted from the fund’s factsheet provided by Lion Global Investors Limited was as at 31 May 2017.

Country Allocation
sector allocation

Note: Performance as at 31 May 2017 (for the SGD-Hedged Class A Acc share class only), 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

BlackRock Global Multi-Asset Income Fund
Stay diversified amid complacent markets

From the outset, the economic outlook looks fairly benign with possible green shoots emerging in Europe and Asia. However, recent events on both the geo-political and policy fronts have highlighted a number of potential downside risks to this assessment. Rising political tensions in the gulf region and the Korean Peninsula have fuelled concerns about the possibility of military conflict which would be unambiguously disruptive to global growth. Meanwhile, recent policy guidance by major central banks including the Federal Reserve, European Central Bank, Bank of England and the Bank of Canada has firmed expectations that the era of easy money is over. If anything, the move towards policy normalisation has begun to gain steam. Consequently, longer term bond yields could move higher and financial market conditions could tighten. Yet despite these material developments, markets have stayed curiously blasé about the risks as evidenced by record high equity markets and historically low volatility in both the bond and stock markets. Against an outlook that seems rather uncertain at this juncture, diversification through a multi-asset strategy can help mitigate the market impact of unexpected turns in political and policy developments.

Past performance
1Y
2.64%
3Y
0.84%
5Y
N.A.
Why We Like the Fund

Market volatility has stayed fairly subdued for the most part of this year. The silence in investment markets could prove to be a little unsettling to some investors for surely markets could turn for the worse. Market exposure through a diversified, multi-asset portfolio could be a good option to participate in potential market upsides while mitigating downside risks. For this purpose, we like the BlackRock Global Multi-Asset Income fund for its adroit focus on managing volatility whilst employing a flexible and unconstrained approach to delivering consistent income to investors. The fund’s portfolio composition includes non-traditional asset classes such as preferred stocks, listed master limited partnerships and real estate vehicles on top of traditional assets such as stocks and bonds. The fund is also well diversified in terms of 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
NAV as at 7 July 2017
S$9.40
Inception Date
31 July 2013
Fund Size
US$5,782.72 mil
Annual Management Fee
1.50% p.a.
Subscription Modes
Cash
Top 5 Holdings
%
ISHARES $ HIGH YIELD CRP BND ETF $
4.20
ISHARES $ CORPORATE BOND UCITS ETF
2.80
BGF USD HIGH YIELD BD X6 USD
1.01
ROYAL BANK OF SCOTLAND GROUP PLC 8.625 12/31/2049
0.53
BARCLAYS PLC RegS 7.875 2/31/2049
0.48
NAV Movement
nav movement

Source: NAV chart based on Bloomberg data as at 7 July 2017; fund information extracted from the fund’s factsheet provided by BlackRock Investment Management was as at 31 May 2017.

Asset Allocation
sector allocation

Note: Performance as at 31 May 2017 (for the SGD-Hedged share class only), 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
Shorten duration as central banks seek to taper and tighten

The Federal Reserve is well on the way towards further policy normalisation as they continue to reverse crisis-era policies. A major part of that effort includes shrinking their bloated balance sheet before the end of this year. Meanwhile, a number of major central banks including the European Central Bank (ECB), Bank of England (BOE) and Bank of Canada (BOC) have also adopted a more hawkish tilt in their policy guidance, broadly confirming that the era of easy money is coming to an end. The ECB is unlikely to expand its balance sheet any further, while the BOE and BOC are looking to raise interest rates. While sluggish inflation means that central banks can afford to move slowly to tighten policy, the trend has decisively moved away from any further easing. With developed markets heading towards monetary tightening, we would advise investors to stay short on duration and hold bonds with shorter tenors as these instruments tend to be less sensitive to increases in interest rates.

Past performance
1Y
-2.2%
3Y
1.5%
5Y
2.5%
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
NAV as at 7 July 2017
S$1.64
Inception Date
22 March 1991
Fund Size
S$320.4 million
Annual Management Fee
0.50% p.a.
Subscription Modes
CPFIS-OA/ CPFIS-SA/ Cash / SRS
Top 5 Holdings
%
DBS CAPITAL FUNDING II VAR PERP (15/06/2018)
6.9
ALIBABA GROUP HOLDING LTD 3.6% 28/11/2024
3.5
ICBC ASIA LTD VAR 10/10/2023
2.4
ASCENDAS HOSPITALITY TRU 3.3% 07/04/2020
2.2
FAR EAST HORIZON LTD 4.25% 30/10/2017
2.1
NAV Movement
nav movement

Source: NAV chart based on Bloomberg data as at 7 July 2017; fund information extracted from the fund’s factsheet provided by Lion Global Investors Limited was as at 31 May 2017.

Country Allocation
sector allocation

Note: Performance as at 31 May 2017 (for the SGD Class A Dist share class only), 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: Growth / Aggressive

Neuberger Berman U.S. Multi Cap Opportunities Fund
Steeply valued markets underscore the need for active management

At the outset, U.S. stocks are unambiguously expensive according to most valuation measures. They are currently selling for much higher multiples of corporate earnings versus its history and even against other regional equities. Steep valuations layered over a bevy of geopolitical and policy risks provide an arguably small margin for error. Yet, despite these risks, we stay neutral on U.S. equities in part due to its defensive traits. On a purely comparative basis, Asian and European stocks tend to exhibit higher volatility versus their U.S. counterpart. Amid such generally stretched valuations, investors would benefit from a more nuanced rotation strategy, where investments shift from steeply valued sectors to quality laggards. At the same time, exuberant markets and prevailing risks underscore the need for diversification and active management. As such, investors looking to add U.S. stock positions to their portfolios would be better served by investing in a unit trust that brings to bear strong research capabilities and shrewd active management.

Past performance
1Y
12.85%
3Y
5.12%
5Y
N.A.
Why We Like the Fund

The fund has delivered strong performance since its inception by investing in U.S. companies across a broad range of market-capitalisation with a bias towards large cap holdings. The fund maintains a concentrated portfolio of about 30 to 40 stocks, constructed on a bottom up basis. It relies on an opportunistic approach to investing and stock-picking is based on in-depth cash flow and capital structure analysis. The fund has a cyclical tilt, with 64 per cent of the portfolio allocated to cyclical sectors such as financials, industrials, consumer discretionary, materials and IT. The fund is managed by an experienced and dedicated investment team based in New York.

About the Fund
NAV as at 7 July 2017
S$29.61
Inception Date
16 July 2013
Fund Size
US$865.44 mil
Annual Management Fee
1.70% p.a.
Subscription Modes
Cash
Top 5 Holdings
%
JPMorgan Chase & Co.
4.88
Goldman Sachs Group, Inc.
4.63
Alphabet Inc. Class C
4.61
Berkshire Hathaway Inc. Class B
4.61
Motorola Solutions, Inc.
4.43
NAV Movement
nav movement

Source: NAV chart based on Bloomberg data as at 7 July 2017; fund information extracted from the fund’s factsheet provided by Neuberger Berman Investment Funds was as at 31 May 2017.

Sector Allocation
sector allocation

Note: Performance as at 31 May 2017 (for the SGD A Acc share class only), 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: Growth / Aggressive

Allianz U.S. High Yield Fund
Stable outlook as default rates hover near post-crisis lows

Much like their equity namesake, bond markets look fully valued to us, implying that the income component or coupon of fixed income assets will become an increasingly important constituent for total return. This is especially true in an environment where the Federal Reserve continues to make further progress towards removing crisis-era accommodation. In this regard, High Yield bonds look attractive and should be somewhat better insulated from the adverse impact of higher interest rates. Solid global growth and low credit default risks further strengthens the case for High Yield paper. In the choice between stocks and bonds, we continue to stay positive on High Yield in large part because the current benign market environment seem much less challenging for fixed income than for equities - the former need only remain creditworthy (or not default) while the latter have high growth expectations to live up to.

Past performance
1Y
7.34%
3Y
-0.61%
5Y
3.01%
Why We Like the Fund

While we prefer credits to equities, we urge that interested investors seek exposure mainly through a portfolio of bonds via a unit trust rather than buying into individual fixed income paper so as to minimise concentration and single issuer risk. Within fixed income, we like high yield bonds predicated on the view that they may be more resilient in the face of rising interest rates. Also, improving fundamentals in the U.S. means the likelihood of defaults have decreased meaningfully. In this space, we like the Allianz U.S. High Yield fund. The fund mainly invests in U.S. corporate bonds rated below investment grade. The fund aims to capture potential long-term capital appreciation through its disciplined focus on security selection and robust investment process. Investors may benefit from potential monthly payouts as well.

About the Fund
NAV as at 7 July 2017
S$8.08
Inception Date
15 June 2012
Fund Size
US$4,821.28 mil
Annual Management Fee
1.39% p.a.
Subscription Modes
Cash/SRS (SGD-H share class)
Top 5 Holdings
%
SPRINT COMMUNICATIONS 11.5% 11/15/2021
1.6
GHCA INC 7.5% 02/15/2022
1.0
AECOM 5.875% 10/15/2024
1.0
MICRON TECHNOLOGY INC 5.875% 02/15/2022
0.9
KRATOS DEFENSE & SEC 7% 05/15/2019
0.9
NAV Movement
nav movement

Source: NAV chart based on Bloomberg data as at 7 July 2017; fund information extracted from the fund’s factsheet provided by Allianz Global Investors was as at 31 May 2017.

Sector Allocation
sector allocation

Note: Performance as at 31 May 2017 (for SGD Hedged share class only), 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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