Discipline, the time-tested alpha
In volatile markets, the real edge is the ability to hold the course and to distinguish signal from noise
AFTER four decades in fund management – the first two focused on institutional clients – I now look at managing private wealth through a different lens.
By design, institutional mandates are relative-return-oriented. Success is judged by performance against the market, represented by equity and bond indices. That naturally steers portfolios towards broad market exposure and the risks that come with it.
Private wealth demands a different objective. It is about absolute returns, with an emphasis on portfolio drawdowns and volatility. The task is not to “beat the index”, but to protect and compound capital through cycles.
This philosophy sits behind our creation of the DBS Barbell Strategy for private clients. It uses clear building blocks to shape portfolios that are both resilient and positioned for growth.
On one side are income-generating bonds and dividend stocks – the ballast. On the other are equities selected to ride secular trends – in other words, the sail tacked to capture capital gains. We also add gold as a risk diversifier, given its low correlation to bonds and equities.
Since its launch in September 2019, the strategy has delivered a net 8.1 per cent in annualised returns. In the year to Aug 14, it stood at 10.3 per cent.
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The record owes little to market fads and much to discipline. We avoid the temptation to chase every passing theme. Instead, we concentrate on sectors and companies with consistent long-term growth, strong competitive advantages, and reliable revenue streams.
Growth engine: backing the price makers
We lean towards “price makers” over “price takers”, especially in a world subject to policy whiplash and tariff turbulence.
In contrast to a price taker, who must accept the prevailing market price for its goods or service, price makers typically own intellectual property, sit within strong ecosystems, and command pricing power that insulates them from trade frictions.
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Nvidia is emblematic of these qualities. So too are Apple and Meta. We also hold more specialised holdings such as Netflix, chosen for its ownership of valuable content and intellectual property – attributes that support pricing power and resilience.
Our conviction about Nvidia dates to 2019, when it was best known for graphics chips. The thesis was straightforward.
Global leadership in graphics processing unit (GPU) technology positioned the company to benefit disproportionately from the rise of compute-intensive applications – first, online gaming, and subsequently artificial intelligence (AI). At the time, GPUs represented around half of Nvidia’s revenue.
Since then, its shares have appreciated roughly fortyfold. We periodically rebalance our portfolio to manage single-stock risk, but our central view remains unchanged: Nvidia has a deeply embedded role in the AI ecosystem that is still in its early innings of global adoption.
Ballast: income, credit and gold
A disciplined approach applies equally to the income side of the barbell. Here, we prioritise investment-grade bonds for stability and capital preservation, resisting the allure of higher-yield, but higher-risk, options. The objective is steady performance that is not compromised by unnecessary exposure.
That same clarity explains two calls that have mattered. First, we were bullish on gold three years ago; bullion has since doubled in price. Second, we favoured short-duration investment-grade credit at a time when many extended duration. When the yield curve subsequently steepened, holders of long-dated bonds suffered capital losses.
Private markets: non-directional value
Private assets, which span private equity, private credit, real estate and infrastructure, have a place within the barbell strategy.
An interesting area of focus is the potential of the sports, media and entertainment sector, which embodies scarcity, content ownership and recurring income.
In the sports arena, for instance, there are only so many elite sports franchises, and the shift to streaming has given them predictable revenues through subscriptions and advertising. Content ownership in this context is not a buzzword; it is a cash-flow engine.
Private equity, in particular, earns its place in client portfolios through active ownership.
Unlike passive investors, private-equity managers actively work to restructure businesses acquired, improve operations, and scale them for global growth. The return driver is alpha – non-directional value creation – rather than market beta. In turbulent public markets, non-correlated return streams and the illiquidity premium provide a useful hedge across cycles.
Patience and process
In the coming months, much ink will be spilled on the path of interest rates. We expect a series of rate cuts over the next one to two years.
Should that change how one invests today? Not fundamentally. In volatile markets, the real edge is the ability to hold the course and to distinguish signal from noise. Everyone can read about what Warren Buffett has done, but few can adhere to the discipline that underpins it.
These approaches are key: Avoid fads; focus on repeatable successes; size positions appropriately; rebalance when required; and keep drawdowns contained. Patience and consistency matter more than clairvoyance.
Opportunities are always present, but they compound only for investors who stay committed, invested, and focused. In a world that feels increasingly volatile and roiled with spectacle, the real advantage lies in something quieter: a process that outlasts the noise.
The writer is chief investment officer, DBS Bank
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