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Investing for long-term outcomes in volatile markets
In today’s volatile investment landscape, affluent investors are seeking world-class advice and solutions to help them navigate the choppy waters ahead, as they look to protect and grow their wealth. According to leading institutional fund managers, the key to doing so is to focus on long-term outcomes while building a diversified portfolio.
UK-based asset manager Baillie Gifford, for instance, has a time horizon of a minimum of 5 years and often much longer when it comes to assessing potential equity investments. This allows them to ignore short-term distractions to discover companies that have strategies for rapid and sustainable growth.
“Many investors are trying to predict what Donald Trump is going to do next. We have no clue what Donald Trump is going to do next and we don’t really care. It doesn't matter very much if you are investing on a 10-year horizon,” said Stuart Dunbar, Partner and and Director, Financial Institutions, at Baillie Gifford.
“There are much more interesting and much more significant things going on in the world. We think wealth creation is about disruption and new business models and change. And that's very much what we try to look at.”
Founded in Edinburgh in 1908, Baillie Gifford is owned by 43 partners, all of whom work in the firm. The company works closely with the management teams of the companies they invest in to help them achieve their long-term objectives. These businesses are not only well-managed, but their success is often tied to their ability to also generate a positive impact on society, noted Mr Dunbar.
“We're trying to find companies that can double in value in the next five years and have at least a chance of going on to double again after that. We won’t always be successful, but you only need to invest in a handful of the very best stocks to deliver meaningfully better returns for your clients in the long-term than those available from an index tracker. Compounding of growth is a powerful thing - for a stock to double its earnings in 5 years requires 15% per annum growth. Such companies are relatively rare, but given the market’s short-termism we think there are many under-appreciated opportunities,” he said.
Investing in resilience
Another investment manager with a similar focus on long-term outcomes is Boston-headquartered, privately owned Wellington Management. With a 91-year history, the firm seeks to deliver sustainable returns over decades. In this specific equity portfolio, Wellington is focused on finding companies that are large cap, high quality and have industry-leading competitive positions.
“We look for companies that have ‘moats’. We then hone in on those that have very high returns. But for us, high returns is really only half of the equation; we're also trying to identify management teams that are focused on sustained growth and deliver compounded value over the long-term,” said Scott Geary, Partner and Head of Global Relationship Group Asia Pacific at Wellington Management.
Such companies typically reinvest their returns into their businesses to reinforce their competitive advantages, or innovate to develop new competitive advantages. “They're trying to make their companies more resilient for the long term,” he said.
Diversification through fixed income
Meanwhile, one of the world’s leading fixed income asset managers, BlackRock, believes that diversification is critical to building and preserving wealth, as it enables clients to build a strong foundation for their portfolios.
“Fixed income is a fantastic diversifier. When you combine it with equities and other asset classes it helps improve returns and lower risks. And that's a really unique feature that can help generate steady returns,” said John Burger, Global Head of Credit for the Financial Institutions Group at BlackRock.
In today’s low-yield environment, he noted that US investment-grade credit has some unique features that take advantage of long-term trends. “The US investment grade credit market is one of the few places in the world that you can generate reasonable risk adjusted returns.”
Meeting the needs of affluent investors
This focus on long-term outcomes to protect and grow wealth is a common theme among these investment managers, and one that resonates deeply with insurer AIA Singapore and its own investment philosophy.
This approach addresses one of the key concerns among the affluent in Singapore today: the fear that their investments will not do well in today’s economic climate. These and other worries emerged in a recent survey of affluent individuals in Singapore by AIA.
To address these issues, AIA Singapore is the first in the market to give its affluent customers in Singapore privileged access to institutional level fund managers through an innovative product known as AIA Platinum Wealth Elite. AIA Platinum Wealth Elite is a bespoke solution, which offers customized premium contribution (with a No Lapse Privilege for at least the first 15 years), personalized accumulation horizon, choice of currency (US$ or S$), and the Income Withdrawal Privilege (to meet liquidity needs, while maintaining coverage).
Through this solution, investors will have access to one of three portfolios, tailored to their risk profile, and powered by a range of investment strategies residing on the AIA Investment Funds platform. AIA Investments will provide overall stewardship to ensure long-term value creation, together with leading institutional investment partners such as Baillie Gifford, Wellington Management and BlackRock.
Underpinning this offering is AIA’s unique wealth management proposition that involves delivering trusted advice and service, leveraging technology to improve outcomes and maintaining a high-level of professionalism among its Personal Wealth Managers (PWMs).
For instance, AIA is the first insurer in Singapore to benchmark the training of its PWMs against the new IBF Private Banking Standards, benefitting affluent and high net worth customers with more robust and holistic financial planning advice. In terms of technology, clients can take advantage of AIA Singapore’s iProfiler, an interactive digital planner that provides fast and accurate calculations, risk profiling and fund recommendations based on their personal wealth goals.
At a time when the short-term outlook for investments is far from clear, AIA Singapore is partnering world-class investment management talent with its own value proposition to help affluent individuals and families preserve and grow their wealth over the long run.