Enhancements to our China Equity Portfolio

The latest recommended portfolio change aims to help the portfolio better meet its objective. This is achieved by broadening the portfolio’s exposure to structural growth opportunities by increasing allocation to the onshore market and enhancing portfolio resiliency across market cycles by improving style diversification and optimising manager selection.

* The latest recommended enhancements to the China Equity Portfolio are as of November 2024. The RPC is part of Endowus’ commitment to source funds that will optimise your portfolios. You can accept or reject the recommended changes (read more in the FAQ section). 

Funds in the China Equity Satellite Portfolio

The rationale behind key changes

A tilt towards A-shares to further tap into structural growth opportunities

China’s onshore equity market, mainly A-shares, presents a broader opportunity set to capitalise on structural growth opportunities. Among these Shanghai- and Shenzhen-listed companies, the sector breakdown is relatively well-balanced, as well.

Innovation and the development of new technologies have incrementally become the focal point of the growth areas of China. The A-share market is home to these companies that contribute to the country’s shift to a consumption-driven, innovation-led economy. There is no shortage of examples: Consumer goods, healthcare, technology, and high-end manufacturing. 

This contrasts with the traditional access to Chinese markets, including offshore markets like Hong Kong, which are largely concentrated in the mega-cap internet names across the communications services and consumer discretionary sectors. 

For the Portfolio, allocation to funds with high Greater China markets is thus removed to make way for an increase in targeted exposure to A-shares.

‍Read more: FOMO on China stock rally: Are you really missing out?

Diverse approaches to create a balanced portfolio across sectors and styles

By including funds with distinct investment strategies, the Portfolio is well-diversified across sectors, styles, and market capitalisations, supporting a smoother investment journey in China’s volatile markets.

Funds within the portfolio are classified into three broad categories based on the role they play. The allocation across these categories is strategically designed to build a portfolio that not only delivers beta to onshore markets but also has the potential to achieve strong up-capture. 

Fund roles within the Portfolio: Core, high-octane, and diversifier

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Refining manager line-up, consolidating overlapping roles and removing lower conviction funds

We have consolidated allocation to funds that adopt similar strategies and exhibit high correlation holdings overlap. Funds with a lowered conviction for reasons such as a recent change in portfolio manager among other factors, have also been removed from the Endowus Satellite Portfolio - China Equities.

Fund correlation, listing and size allocation

Owing to the distinct investment approaches of each underlying fund, the common holdings overlap is fairly low, making them complementary allocations within a portfolio context. The top 10 holdings for the portfolio illustrate strong differentiation vs simply buying the index, with mega-cap stocks such as Kweichow Moutai and Tencent at an allocation of less than 5% each.

Differentiation and diversification: Common top 10 holdings among funds

Allocation of A-, H-shares, ADRs, and other

The new version of the Portfolio features a higher allocation to the onshore equity market represented by A-shares, in line with the objective to provide a broader exposure to structural growth opportunities in China.

Size allocation

The allocation to small and mid-cap companies will increase with the addition of T. Rowe Price China Evolution Equity. This also introduces exposure to unconventional investment ideas and less correlated sources of return relative to peer funds.

Sector allocation

Sector allocations are more balanced with the introduction of the BlackRock BGF Systematic China A-Share Opportunities Fund as a core position within the portfolio, providing beta to onshore markets with a low tracking error.

Portfolio performance: Comparing the old and new Portfolios

While hindsight often leads to better-optimised returns compared to the previous iteration, we believe that the new portfolio will deliver improved risk-adjusted returns in the long term through this recommended portfolio change.

The tables above show that the New Portfolio has consistently outperformed the current version across multiple calendar years and 1-year, 3-year, and since common inception metrics.

While registering similar volatility figures, the portfolio’s improved downside protection is displayed in its lower maximum drawdown. This highlights the risk reduction benefits achieved through thoughtful manager selection and diversification whilst not compromising on returns. 

Learn more about how you should approach a core-satellite portfolio investment strategy.

Watch the webinar

Recommended portfolio changes for other Endowus Portfolios (2024)

• Endowus Flagship CPF Portfolios: Introducing Dimensional
• Endowus ESG Portfolios: Invest consciously with purpose
• Endowus Megatrends Portfolio: The power of the future
• Introducing Endowus Real Assets Portfolio

Frequently asked questions

1. How do I accept the Recommended Portfolio Change?

You can view and opt in for the changes via any of the 3 options below:

• Click ‘Login’ from the Recommended Portfolio Change email you would have received.
• Click the notification bell on your Dashboard, then select ‘Review recommendations’.

• Select the relevant goal’s page under the My Goals section, then select “View recommended changes” under ‘Manage goal’. You can find a video tutorial on how to do so here.

The entire process will take 5 to 10 business days to complete. A full redemption cannot be performed until the rebalancing process is completed.

Read: FAQ for Recommended Portfolio Change. 

2. Why does Endowus recommend portfolio changes?

Our Investment Committee is constantly evaluating the funds in our advised portfolios and the wider investment universe. If we feel that other funds can better express our asset allocation views at a lower cost or improve the risk-return profile of the portfolio, we will recommend a portfolio change to our clients.

Watch: How do Endowus recommend portfolio changes work?

3. What is the Endowus Core-Satellite approach?

Most investors should begin with an allocation to the Endowus Core strategies. All core portfolios must be globally diversified, have a strategic passive asset allocation (SPAA), and be low-cost. It is advisable that all investors begin with a meaningful asset allocation to core portfolios for their essential financial goals (with Cash, CPF, and SRS) before extending their investment holdings to Satellite positions.

Read more: How to approach core and satellite investing with Endowus

4. Why is the recommended portfolio change suitable for me?

Monitoring the investments in your portfolio and trying to optimise for improvements can be a time-consuming and complicated affair. This is where working with a trusted financial adviser like Endowus can help you improve the way you invest. We represent non-institutional investors to negotiate for more efficient share classes with established fund management companies. 

Have more questions? Schedule a 1-on-1 appointment with our MAS-licensed financial advisors at any time!

Enjoy lower fees, and stronger long-term gains with Endowus

The Endowus Investment Office is constantly monitoring your advised portfolios and searching for new options that will improve these portfolios. Opt in for the recommended portfolio change today to upgrade your Portfolio.