Save&Invest

Simulated portfolios all outperform benchmarks

This is due to a better showing by the Singapore stocks in May; panellists decide to take profit

The three simulated investment portfolios tracked under the Save & Invest Portfolio Series were fully invested in May and outperformed benchmarks.

The Portfolio series introduced by The Sunday Times in January last year features communications manager Shona Chee, 26, entrepreneur Getty Goh, 38, who is married with two children, and retiree Wang Moo Kee, 62.

It does not involve actual money, as it is intended for the purposes of illustration and education only.

To keep them simple, accessible and easy to monitor, all three portfolios are limited to instruments listed on the Singapore Exchange (SGX) and Singapore Savings Bonds, which can be bought via ATMs.

There are similarities between the holdings, but the allocations differ depending on individual risk-return objectives and preferences.

Each portfolio has a benchmark that best reflects its mix. For example, Mr Goh's portfolio is heavier on blue-chip shares, while bonds mirror Mr Wang's more conservative stance. The simulated portfolios are constructed by CFA Society Singapore (CFAS) for an ideal investment horizon of five to 10 years.


Thai Beverage's Chang beer brewery. The CFAS panel says that the decision to initiate positions in Thai Beverage were driven by factors including robust earnings forecasts for the firm. PHOTO: BLOOMBERG

PORTFOLIO PERFORMANCE

Ms Chee's portfolio was up 2.01 per cent for the four weeks to May 31, against 1.26 per cent for the benchmark. Mr Goh's portfolio added 2.57 per cent, against 1.45 per cent for the benchmark, while Mr Wang's rose 1.86 per cent, ahead of the 1.12 per cent achieved by the benchmark.

The relative outperformance of the portfolios was due to a pick-up in the performance of the Singapore stock security selection headlined by Venture Corp (10.22 per cent) and First Resources (6.15 per cent).

The real estate investment trust (Reit) selections of A-Reit (3.13 per cent) and Keppel DC Reit (4.44 per cent) also managed to outpace the broader S-Reit index.

The global exchange-traded funds (ETFs) allocation outperformed the MSCI World benchmark, driven by a continued rally in the Euro Stoxx 50 ETF (3.11 per cent) and FTSE China 50 ETF (3.61 per cent). The bond selection delivered a positive return, keeping pace with the ABF Singapore Bond ETF, and booked coupon income from holdings in DBS 4.7 per cent Perp and FCL 3.65 per cent.

  • The Save & Invest Portfolio Series

  • The Save & Invest Portfolio Series features the simulated portfolios of a young working adult, a married couple with two young children, and a retiree. It guides retail investors in basic investment techniques and on how to build a portfolio in line with their financial goals and risk tolerance.

    This initiative involves the Singapore Exchange collaborating with CFA Society Singapore (CFAS) and MoneySense, the national financial education programme.

    The CFAS panellists tracking the simulated portfolios are: Mr Phoon Chiong Tuck, senior fixed income manager at Lion Global Investors; Mr Jack Wang, partner at Lexico Capital; Mr Praveen Jagwani, chief executive of UTI International, Singapore; and Mr Simon Ng, CEO of CCB International (Singapore).

    You can gain access to past articles and monthly portfolio reports by clicking on the Save & Invest Portfolio Series banner at www.sgx.com/academy

PORTFOLIO ADJUSTMENTS

The CFA Singapore panel noted that while dark clouds may be gathering (North Korea's intervention, interest rate hikes), it does not believe there is a need yet to go defensive. Nevertheless, the panel decided to take some profit on positions that have outperformed, or where conviction levels have reduced. The following portfolio adjustments were made on May 31:

•Taking partial profit on DBS (which has gone up by 36 per cent), by selling half the existing position in all three portfolios;

•Trimming the SGX position by half in all portfolios; •

•Trimming the US ETF positions (DBX MSCI USA) by half in all portfolios. In Ms Chee's case, the US ETF proceeds were diverted entirely to the Europe ETF (DBX Euro Stoxx 50). For Mr Goh and Mr Wang, the US ETF proceeds were diverted equally to gold (SPDR Gold Shares) and the Europe ETF (DBX Euro Stoxx 50);

•Initiating a position in Wing Tai in all three portfolios; and

•Initiating a position in Thai Beverage for Mr Goh and Mr Wang's portfolios, but not for Ms Chee because of cost considerations.

The CFAS panel advised that the decision to initiate positions in Wing Tai and Thai Beverage was driven by a few compelling factors, such as Wing Tai's unconditional cash offer for Wing Tai Malaysia at a compelling 53 per cent premium. As for Thai Beverage, the factors include robust earnings forecasts for the firm, and its goal to develop more income sources outside Thailand.

MARKET OUTLOOK

The panel said the "sell in May and go away" rhetoric did not really apply this time round. It noted that there have been pockets of profit-taking rather than broad-based selling. Instead of outright reduction of risk assets in portfolios, there have been re-allocations of risk within portfolios.

The panel said: "Global equities made further headway in May, and this time, the rally was witnessed across the board. Some key macro data, for example reflation in certain countries, as well as earnings growth drove the momentum in equity markets."

Investors can anticipate some key events to aid their portfolio decisions. There is the Group of 20 summit on July 7 and 8 in Hamburg. Aside from discussions around economies, other important themes expected to surface include those centred on social issues, climate change and perhaps policies in the United States.

Investors will also be looking at how China addresses its debt issues. Moody's downgrade of its rating in early May was prompted by rising debt levels and slowing growth, the panel said.

A version of this article appeared in the print edition of The Sunday Times on June 11, 2017, with the headline 'Simulated portfolios all outperform benchmarks'. Print Edition | Subscribe