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Ride out the ups and downs of market cycles with UOB Capital Builder

Active investing can support sustainable capital growth amid market volatility

UOB Capital Builder is a multi-asset solution that can help investors grow their money to meet their medium- to longer-term needs.
UOB Capital Builder is a multi-asset solution that can help investors grow their money to meet their medium- to longer-term needs.PHOTO: GETTY IMAGES

It has been a rollercoaster ride for global stock markets over the past few months, first tumbling into bear market territory before recovering somewhat even as the world continues to grapple with the coronavirus pandemic. Central banks have cut interest rates and rolled out massive stimulus to save companies and jobs amid a deepening economic downturn. Against this backdrop, the question on many investors’ mind is: How do I maintain or grow my wealth?

To grow their money, investors generally have two options — seek capital gains or income returns. Digital disruptions, trade rows and geopolitical risks aside, the global public health crisis caused by the novel coronavirus has raised uncertainty to new levels, particularly for investors.

“There are a lot of possible outcomes that we cannot foresee in the future,” said Mr Abel Lim, Head of  Wealth Management Advisory and Strategy at United Overseas Bank (UOB).

He thinks it is best to adopt a total return strategy to seek both capital appreciation and stable, recurring income at the same time so as to hedge bull and bear markets against each other. This is especially pertinent given the significant market swings of late. As an example, benchmarks in the United States, Japan, Singapore and other regional markets fell into bear territory in March,1 but by early May, the tech-focused Nasdaq Composite had erased all its 2020 losses and by early June, the S&P 500 followed suit.2

UOB Capital Builder is one solution that investors can tap to grow their money sustainably at a time of heightened market volatility and record low interest rates. With a focus on capital growth, it actively looks for opportunities across market cycles and helps investors manage risk and volatility through diversification across asset classes and markets globally.

UOB Capital Builder currently consists of one fund that is exclusive to the Singapore bank. BNP Paribas A Fund Capital Builder, as the fund is called, has a multi-asset approach and invests from a pool of 38,000 funds globally across all asset classes, geographical regions and investment styles.

“It can make adjustments based on market cycles to ensure that it achieves the best possible outcome,” said Mr Lim.

He stressed that the fund has a risk control mechanism which can potentially buffer downside risk by pivoting away from higher-risk assets to reduce volatility during times of market stress.

A multi-asset solution

Mr Lim noted that the fund, which is managed by Paris-headquartered BNP Paribas Asset Management, is a multi-asset solution.

“It can go anywhere,” he said, referring to the ability of the fund managers to pick from a variety of different asset classes — equities, bonds and commodities like gold — depending on the market cycles.

Central banks around the world have slashed rates close to zero to counter the economic impact of the coronavirus crisis and according to released minutes of the Federal Open Market Committee meeting from June 9 to 10, the US Federal Reserve has signalled that interest rates will stay near zero until the end of 2022.3, 4

“The lower-yield world will be here for longer. Investors should therefore focus on a combination of income-producing instruments and capital growth solutions to optimise their portfolio returns.” he said.

At the same time, the fund can also deftly switch into investments like government bonds at the appropriate times to focus on quality investments that are safe.

“Investing is also about risk management. You can participate in the upside and also seek to minimise huge potential drawdowns,” Mr Lim stressed.

The minimum investment for this fund is S$1,000, with minimum subsequent top-ups of S$100. There is no lock-in period.

Going active for growth

Mr Lim noted that most retail investors are not equipped with the skills and capabilities to navigate the markets.

“It’s hard to know how and when to enter,” he said, adding that some high-quality funds are also out-of-reach for retail investors as they only cater to affluent investors with substantial investment outlays.

He thinks a passive investing approach that solely tracks market benchmarks might not be able to deliver the healthy returns that investors received in previous years, because of the deterioration in the global economic outlook.

“You need a specialist fund manager who has access to a wide investment universe of funds globally via an open architecture to ‘kick the tyres’ literally,” he said. “As an active fund, the fund manager will speak to the chief executives of the companies and have good on-the-ground knowledge to seek out the winners and identify potential losers and avoid them,” he explained.

This UOB Capital Builder solution also has an edge over many other investment solutions as it combines both proprietary data analytics models and the expertise of the fund’s investment professionals.

“Investors in Singapore tend to chase big ideas — like when emerging market debts were hot, people were chasing after that. But retail investors are always behind the curve, behind the institutional investors. They get the news late,” he said.

These institutional investors are armed with sophisticated big data analytics, combined with rigorous research, that they subsequently use to make investing and asset allocation decisions. And this is what investors can benefit from when they opt for this solution, he added.

Mr Lim highlighted that the Capital Builder solution from UOB caters to investors with at least a moderate risk appetite, as it seeks to optimise capital gains.

It can help people in the earlier stages of their careers grow their money faster for goals like buying a property, getting married and having children, said Mr Lim.

He thinks a 15-year time horizon from the age of 25 to 40 is good enough to both smooth out the volatility as well as to grow their capital meaningfully.

That said, older investors who are between 40 and 45 may also want to take some risk with a portion of their portfolio to grow their assets more aggressively.

“In general, people are living a lot longer. To make sure that your assets can last longer, you need a combination of income-producing assets and capital growth solutions to enhance long term portfolio returns,” said Mr Lim.

Click here for more information on growing your capital sustainably with UOB Capital Builder.

1. https://www.straitstimes.com/business/companies-markets/asian-stock-markets-fall-into-bear-territory-sti-in-bear-grip-for-first
2. https://www.straitstimes.com/business/companies-markets/wall-street-retreats-after-rally-as-focus-shifts-to-fed-meeting
3. https://www.wsj.com/articles/fed-debated-options-to-provide-more-economic-support-11593626400
4. https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20200610.pdf

Important Notes and Disclaimers:

The information contained on this publication shall not be regarded as an offer, recommendation, solicitation or advice to buy or sell any investment product and shall not be transmitted, disclosed, copied or relied upon by any person for whatever purpose. Any description of investment products is qualified in its entirety by the terms and conditions of the investment product and if applicable, the prospectus or constituting document of the investment product. Nothing on this publication constitutes accounting, legal, regulatory, tax, financial or other advice. If in doubt, you should consult your own professional advisers about issues discussed herein. The information contained on this publication, including any data, projections and underlying assumptions, are based on certain assumptions, management forecasts and analysis of known information and reflects prevailing conditions as of Aug 26, 2020, all of which are subject to change at any time without notice. Although every reasonable care has been taken to ensure the accuracy and objectivity of the information contained on this publication, United Overseas Bank Limited (“UOB”) and its employees make no representation or warranty of any kind, express, implied or statutory, and shall not be responsible or liable for its completeness or accuracy. As such, UOB and its employees accept no liability for any error, inaccuracy, omission or any consequence or any loss/damage howsoever suffered by any person, arising from any reliance by any person on the views expressed or information contained on this publication.

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