2018's big picture

BY NOW, MOST READERS will have listened to and studied their financial advisers' recommendations for 2018. The consensus view is to stay invested in equities, particularly in Asia and the emerging markets. Up to end-January, equities continued their upward trajectory. In the 12 months to end-January, the S&P 500 returned over 27 per cent; Asia ex-Japan stocks over 41 per cent; and the emerging markets nearly 39 per cent.

It is easy to be lulled into complacency. While the US has seen an almost uninterrupted climb in the past nine years, Asia has been unloved until the past year. Still, Michael Hartnett, head of global strategy of BofA Merrill Lynch Global Research, perhaps said it best in a December statement: "Our overall outlook for the year ahead is macro-bullish, so much so that we're ultimately market bearish."

He added: "Investors are chasing growth and higher-yielding assets in a bull market that has been driven and enabled by central bank liquidity. We see an end to this Icarus trade and an aggressive downgrade of risk assets once profits peak, investor positioning becomes excessively enthusiastic, and central banks start withdrawing liquidity as they scale back support."

It is surely prudent to scale back expectations. Strategists have accordingly advised investors that 2018 returns are likely to be more muted than the robust returns of 2017. Investors, they add, should be broadly diversified and seek out uncorrelated assets.

High net-worth investors would do well to invest in private equity or venture capital. In this respect, we profile homegrown venture capitalist Dr Finian Tan, whose funds under the firm Vickers Venture Partners are consistently in the top quartile among their global peers. Dr Tan, whose career includes a stint in government, made his name as an early investor in China company Baidu. His firm last year raised US$230 million for its fifth fund - more money than he has raised in the previous four funds since 2005.

To build a portfolio, Dr Tan first takes a top-down approach to carefully pick mega-trends that he believes will have legs for the next few decades. One theme, for instance, is the expected proliferation of the Internet of Things. This leads to companies whose technologies enable IoT adoption. One of the portfolio companies, for instance, is AgilePQ, which provides solutions for IoT security.

Interestingly, Dr Tan sees cryptocurrencies as a mega trend. "Several cryptocurrencies are big and bubbly. But you never know how big a bubble can get, so never sell short a growing bubble. The total amount of cryptocurrencies in 2018 will be larger than 2017. As long as you have a per cent of your net worth in crypto - in all of them - you will make money. If you buy a single one you could burst. But cryptocurrencies are here to stay."

In this issue, we hope you find useful insights. One very topical one is in fact on cryptocurrencies. In the column Legal Vantage, Stephen Banfield of Withers KhattarWong offers seven predictions on digital currencies that have taken the world by storm. He predicts, for instance, more red tape as cryptocurrencies attract more regulatory scrutiny. And, the first investment by institutions as distribution broadens into index trackers and ETF-style products.

Elsewhere in this edition, in our Asset Manager profile, we cast the limelight on a new fund investing in the artificial intelligence theme. Allianz Global Investors director Stephen Jue is convinced that AI will eventually be adopted across a broad range of industries, and drive gains in productivity and enhancements. The fund invests in three layers of AI adoption - infrastructure, AI applications including robotics, and AI-enabled industries.

In the Real Estate column, Alice Tan of Knight Frank looks into the outlook for the residential property, particularly as the collective sale fever heats up and developers' responses to Government Land Sales have been robust. Positive sentiment has helped to drive transaction volumes in the wider residential market, and lift median prices of landed and non-landed homes. She expects home prices to rise this year, and rentals as well.

Meanwhile, Tara Loader Wilkinson (Ultra Wealth column) examines the immense challenge of removing as much as 10 billion tons of carbon dioxide from the atmosphere to help meet climate goals. One company, Climeworks, is doing its share through direct air capture. It sucks carbon from the atmosphhere and filters out pure CO2 to make a commercial product.The challenges for the company and others like it are scale and funding.

We have refreshed the Wealth magazine with a new look and new columns that we hope you enjoy.

We wish you a fruitful year ahead and a rewarding investment journey.

Genevieve Cua Wealth, Editor