Finding value in managed portfolios

MORE investors are warming to the idea of managed investment products as it grows increasingly difficult to navigate and predict the impact of macro events.

Today's "modern affluent" millennials, in particular, are showing greater interest and have placed a greater proportion of their investible assets in managed products and portfolios compared to other client segments, says DBS.

This comes even as younger investors, being relatively new to their current stage of wealth, generally prefer to be more hands-on with their decisions.

Steven Ong, head of DBS Treasures in Singapore, observes that as clients grow more affluent, they become more exposed to the importance of taking a holistic overview of their investments.

This means they are more attuned to thinking with a "portfolio concept" in mind and view it as imperative to actively seek out platforms that provide a holistic overview and opportunities for diversification of their investments, says Ong.

This reflects a departure from only making key investment decisions in a transactional or episodic manner, such as by reacting to news-driven events or major corrections in the financial markets, he adds.

Amid heightened market volatility, it has become more crucial than ever for investors to diversify their portfolios to stem risks.

A recent concern raised by DBS clients is on how to invest in China going forward, given contagion fears from the Evergrande crisis and Beijing's accelerated push towards common prosperity.

"This has led to a suite of new government regulations on the technology, private tuition, and gaming sectors, which created some panic among investors," says DBS chief investment officer (CIO) Hou Wey Fook.

Another event would be the imminent tapering by the US Federal Reserve, where investors weigh the possible impact on their portfolios, he adds.

More options

Other concerns include the resurgence of Covid-19 and the impact of Europe's regulatory changes, such as the lifting of dividend caps imposed at the start of the pandemic.

"Through our managed investment products, clients leave their investments with a team of experienced portfolio managers, investment strategists, product and research specialists who seek to provide resilient and diversified portfolios to optimise risk-adjusted returns," says Hou.

Apart from macro uncertainties and the shift in investing mindsets, the democratisation of wealth management is another key reason for rising interest in managed portfolios among the modern affluent.

Industry developments have resulted in more managed products and portfolios constructed with unit trusts and exchange-traded funds being used as underlying instruments - leading to greater accessibility for more investors, says Ong.

In the past, these portfolio solutions and services, actively managed by portfolio managers, usually come with high minimum investment requirements and were reserved for the ultra-high net worth individuals who are private banking clients.

Today, DBS customers can invest via its robo-advisory service, digiPortfolio, which offers ready-made portfolios from S$/US$1,000.

The bank's Treasures clients - accredited investors with investible assets of S$350,000 - are also able to tap flagship products such as the DBS Barbell Strategy Note, IDEA Fund, and the Barbell Income Fund.

"Such product solutions allocate assets to the highest conviction calls from a factor-based and thematic perspective, and participate in potentially rising yields," said Ong.

DBS' barbell strategy for portfolio construction seeks to balance growth equities for maximum capital gains on one end, with income-generating assets on the other.

On the growth end, it favours IDEA companies - the innovators, disruptors, enablers, and adapters of their industries. These are companies that challenge the status quo and embrace a digital world.

On the income end, dividend-yielding equities and bonds are preferred as the income nature of these assets provides resilience to the overall portfolio, says Hou.

Barbell strategy

Using this strategy, investors can achieve a balance between risk and reward by investing in assets at both ends of the risk spectrum while avoiding those that fall in the middle.

It is a flexible approach that can be tailored to suit one's investment goals, risk appetite and time horizon.

DBS' Barbell Income Fund, for example, is a multi-asset fund that utilises the barbell strategy to provide income generation and capital growth.

Apart from investing in bonds and dividend-yielding equities, the fund also invests in growth stocks with a covered call writing overlay, which seeks to enhance income generation and mitigate the downside in times of market volatility.

"Today's low-yielding world warrants new income strategies. A traditional portfolio that only invests in bonds will no longer suffice," says Hou.

As Covid-19 continues to trigger digital transformation in all sectors, DBS' IDEA Fund was created to provide capital appreciation by investing companies that are well positioned to ride the disruption wave and thrive in a digital economy.

The fund is a global portfolio comprising some 50 stocks selected from 20 themes including blockchain, big data, artificial intelligence, biotechnology and space commercialisation, among others.

"Our world is changing rapidly and almost every industry is facing disruption. In the face of uncertainty, it is paramount to build a resilient portfolio for changing times," says Hou.

DBS' advisory capabilities

Products available to DBS Treasures clients range from ready-made portfolios such as digiPortfolio, to bespoke in-house structured products and solutions that are available to Accredited Investors (AIs).

DBS Treasures AI customers get access to a host of in-house managed investments including:

• CIO Barbell Note
• CIO Barbell Income Fund
• Global Income Note
• ESG Focus Note
• DBS IDEA Fund

Our digital capabilities on digibank:

• One platform to trade equities, forex and funds, access to over 500 investments across 7 markets.
• Cognitive Insights to anticipate and learn how you invest, to give you the alerts you need
• Personalised insights and research-backed funds and equities recommendations

Personalised expert advice for clients:

• Advisory Experts (relationship managers, investment counsellors, Banca specialists) who will review your portfolio regularly and advise based on your wealth needs
• Insights from the DBS CIO team to provide regular investment ideas and guides on the market on a regular basis

At DBS Treasures, an Accredited Investor can get started with investible assets of S$350,000. To qualify as an Accredited Investor, you should have:

• Net personal assets of more than S$2 million (or its equivalent in a foreign currency) where net equity of primary residence is capped at S$1 million of the S$2 million threshold,

or

• Net financial assets (net of any related liabilities) of more than S$1 million (or its equivalent in a foreign currency),

or

• Income in the preceding 12 months is not less than S$300,000 (or its equivalent in a foreign currency).