Endowus model portfolios — Q3 2023 performance comparison

The Endowus Investment Office has curated and optimised model portfolios using Best-In-Class Funds as building blocks for various investor needs. 

Investors in Hong Kong can use these pre-populated templates as a starting point for their portfolios; they can take the template as it is, or make changes to suit their preferences and needs.

The Core portfolios may suit your essential life needs and financial goals, as they are meant for goals such as long-term general wealth accumulation, short-term cash management, and passive income for regular cash flow. The Satellite portfolios are designed to target specific regions, themes, asset classes, and megatrends.

For an overview of the Endowus model portfolios, please refer to this article. 

Read on to find out how the model portfolios performed in the third quarter of 2023.

Endowus Global model portfolios

About the Endowus Global model portfolios: The Endowus Global model portfolios consist of equity and fixed income funds. They make up the backbone of an investor’s overall investment strategy, and can be catered to your risk tolerance and return expectations. 

Key performance highlights: The Endowus Global model portfolios retracted in the third quarter of 2023, similar to the broad equity and fixed income markets.The 100% Equity portfolio performed in line with its benchmark, the MSCI All Country World Index (ACWI) —declining 3.4%. On the other hand, the 100% Fixed Income portfolio had a relatively strong Q3, retracting only 1.2%, maintaining its lead over the benchmark Bloomberg Global Aggregate Index — which declined by 1.8% in Q3 — in both the third quarter and year-to-date periods.

The 100% Equity portfolio’s overweight allocation to the emerging markets relative to the index was beneficial from an asset allocation perspective. However, the Portfolio’s allocation to the Schroder Global Emerging Markets Opportunities Fund proved to be a detractor as the fund underperformed the MSCI EM Index by more than 4 percentage points. On a relative basis, the T Rowe Price Global Value Equity Fund was the strongest performer in the equity line-up. It outpaced the MSCI ACWI Index by more than 2%, aided by the team’s stock selection in the US.

The 100% Fixed Income portfolio outpaced the global fixed income markets (represented by the Bloomberg Global Aggregate Index) by about 0.6 percentage point. The primary driver of this outperformance was the PIMCO GIS Income Fund, which had a shorter duration relative to the index during the third quarter. The PIMCO GIS Global Bond Fund also outperformed the broader fixed income market by a slight margin.

Read more: Introducing Global model portfolios: a core investment for everyone

Endowus CashUp model portfolios (previously known as Endowus Cash Management model portfolios)

About the Endowus CashUp Portfolios: Designed for short-term cash management, they are built using high-quality money market funds or ultra-short duration fixed-income funds.

Key performance highlights: As we move through the third quarter of 2023, the CashUp Portfolios maintained their positive momentums, delivering positive returns year-to-date. In the current market environment, both CashUp Simple and CashUp Plus — maintain similar levels of duration and investment strategy. 

However, as the possible end of the rate hike cycle approaches, a slight divergence in the portfolios' positioning may develop. CashUp Plus is expected to adopt a slightly more aggressive stance by adding duration to its strategy, which means it will start allocating to “longer” duration securities that offer higher return potentials in exchange for higher interest rate risks. Regardless, the underlying funds of the CashUp Plus portfolio are money market funds and ultra-short-duration fixed income funds, and the respective managers will strive to manage them in a way such that they are suitable for short term cash management without taking oversized risks.

Lastly, investors are reminded that the CashUp Portfolios, along with any other investment products on Endowus, are not capital protected and their values may rise, as well as fall.

We have been observing signs of yield peaking and staying at the prevailing high levels, as Central Banks and policymakers around the world near the end of their rate hike cycles. The CashUp Portfolios are largely exposed to US interest rates that are widely believed to stay elevated for longer. The Endowus CashUp Portfolios can capitalise on the prevailing higher levels of yield, while the active management of the underlying fund managers allows the funds and ultimately, the Portfolios, to benefit from capital appreciation opportunities when the markets enter a rate cut cycle in the upcoming months or years.

Read more: Introducing the newly launched CashUp Portfolios‍

Endowus Passive Income model portfolios

About the Endowus Passive Income model portfolios: The three Passive Income model portfolios meet different income and capital preservation or growth needs for investors at different life stages.

Key performance highlights: 

The Passive Income - Steady model portfolio outperformed the Bloomberg Global Aggregate Index in Q3 2023. Overall, the portfolio’s shorter duration relative to the benchmark, as well as its yield curve positioning contributed. Additionally, its allocation to investment grade and high yield corporates, as well as allocation and security selection in certain securitised sectors, also contributed. Its allocation to Asian bonds, however, offset the outperformance partially.

The Passive Income - Plus model portfolio outperformed the Bloomberg Global Aggregate Index and was flat for the quarter. This was primarily due to the Plus portfolio’s shorter duration positioning, as well as its allocation to high-yield bonds.

The Passive Income - Growth underperformed the 20-80 Equity - Fixed Income Composite Index. The underperformance of the equity portion of the portfolio was the primary driver of the Portfolio’s relative performance while the fixed-income portion of the portfolio contributed positively to relative performance. Within the equity portion, the emerging market equity fund and global equity funds were the biggest detractors.

Read more: Introducing Passive Income model portfolios: earn payouts effortlessly

Endowus Satellite model portfolios

The Satellite model portfolios are designed to supplement the Core portfolios, and offer Hong Kong investors specific exposure to opportunities in selected regions, themes, asset classes, and trends. In taking a core-satellite approach, most investors should allocate the bulk of their asset allocation to the Core portfolios. 

China Equities model portfolio 

About the China Equities model portfolio: The China equity model portfolio aims to provide investors with holistic exposure to the China stock market, and consists of five Best-In-Class China equity funds.

Key performance highlights: 

In August, Chinese stocks, particularly in the real estate sector, declined significantly as investors questioned the sufficiency of economic stimulus. Additionally, China's official PMI manufacturing index, while showing a slight increase in August, continued to signal the fifth consecutive month of contraction.

Greater China Markets such as Hong Kong and Taiwan posted weak performance as well. Hong Kong saw the suspension of trading for Evergrande following a sharp fall in prices, and Taiwan stocks fell over concerns over contagion effects from China's property debacle. 

Against this backdrop, the Endowus China Equity Portfolio underperformed during the third quarter of 2023. While positive stock selection and an underweight to communication services added the most to performance, the positive impact was offset by a strong overweight to, and negative stock selection within the information technology sector. 

Read more: Introducing the China Equities model portfolio: capture Greater China’s high growth potential

Sustainability - Equities model portfolio 

About the Sustainability - Equities model portfolio: It offers access to ESG (environmental, social, and governance), sustainable, and climate equity funds, so that investors can contribute to a better, sustainable future.

Key performance highlights: The Sustainability - Equities model portfolio continued to face challenges on multiple fronts in the third quarter of 2023, after experiencing a difficult second quarter. The portfolio posted a -6.8% return in the third quarter, lagging the index’s -3.4% return. The strong growth tilt of the portfolio was a detractor compounding the negative impact from the severe underweight in the US versus the benchmark. The worst performing funds in the portfolio during the quarter were the BGF Sustainable Energy Fund and the Schroder ISF Global Climate Change Fund.

Global Technology model portfolio 

About the Global Technology model portfolio: It aims to provide access to the most innovative technology and technology-related companies around the world, across various market capitalisations and sectors.

Key performance highlights: The IT sector witnessed significant fluctuations during the third quarter of 2023.The Global Technology Portfolio underperformed the broad equity market (as represented by the MSCI ACWI Index) by a slight margin.

In July, an initial wave of optimism swept the sector as positive investor sentiments were buoyed by encouraging economic data, demonstrating robust growth and falling inflation. The Technology Portfolio outperformed the MSCI ACWI IT Index during this month, benefiting from its exposure to less-represented names in the broader benchmark.

However, in August, as the investors were hit by more uncertainty around rate hikes and inflation, a shadow was cast on the IT sector's performance in August and September, making it one of the weakest sectors in Q3. This downturn affected not only the "Magnificent Seven" tech giants but also the relatively smaller-cap and less-established companies that the underlying funds of the Technology Portfolio tend to have a greater exposure to. Although less momentum focused funds like the Fidelity Global Technology Fund provided some resilience, the Technology Portfolio concluded Q3 on a negative note after a challenging August and September.

Read more: Introducing the Global Technology model portfolio: ride the wave of tech innovation

Future Trends model portfolio 

About the Future Trends model portfolio: It is a 100% equities portfolio made up of six Best-In-Class Funds spanning the major themes of healthcare, technology, industrials, and more. It caters to investors seeking exposure to high-growth firms.

Key performance highlights: The Future Trends Portfolio declined in the third quarter, as market sentiment soured in August and September on the back of the US Fed’s hardening stance. While the Portfolio was largely able to keep pace with the MSCI ACWI Index in July, its higher market beta/growth tilt led to larger losses in August and September. 

In particular, the renewable energy sector fell out of favour as investors continued to shift their attention and capital into trendier themes such as artificial intelligence. The sector is also more susceptible to rising interest rates and increasing material costs, due to the shrinking in value of future cash flows and squeezing of profit margins. 

The BGF Nutrition Fund continues to be a drag on performance, with the Fund ending the quarter with a negative year-to-date return. Stock-specific issues resulted in the Fund having an outsized decline in September. On a more positive note, the AB Healthcare Fund was resilient across the quarter and managed to generate a positive return.

Read more: Introducing the Future Trends model portfolio: invest in the biggest forces of change

How to access the Endowus model portfolios in Hong Kong on Fund Smart 

With Endowus, you can plan and manage your money with institutional-grade model portfolios that have been curated by our Investment Office, offering globally diversified exposure with Best-in-Class underlying funds as building blocks..

You can use these pre-populated portfolio templates as a starting point for your portfolio. You can either take the template as it is, or tweak the portfolio allocations to suit your personal risk appetite, preference, and goals.

Alternatively, on the Fund Smart platform, you can build your own do-it-yourself (DIY) portfolios from scratch, through Endowus’ proprietary portfolio creation tool. To learn more about Fund Smart, refer to this article.

If you are new to Endowus in Hong Kong, you can get started by opening an account with us.

Already have an account with Endowus HK? Here are a few simple steps to start using Fund Smart:

• Login to your Endowus account
• Click on “Invest |  Redeem”
• Click on “Add Goal”, and then follow the instructions to select the fund or portfolio of your choice, based on your investment horizon and objective.

Read more: 

• The Big Tech Rally — Market Insights (Q2 2023)
• Introducing Endowus model portfolios — curated with Best-In-Class Funds for core-satellite strategies
• Why invest through Endowus
• Introducing the Endowus HK team
• Choosing Endowus when investing in Hong Kong

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