Endowus model portfolios — Q4 2023 performance update

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.

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

Endowus Global model portfolios (HKD)

Key performance highlights: The Endowus Global HKD model portfolios delivered strong results for the year. In particular, on a one year basis, the 100% Fixed Income Portfolio outperformed the Bloomberg Global Aggregate Index by more than 2%. The 100% Equity portfolio trailed the MSCI ACWI by 0.8% for the year. 

The equity funds in the 100% Equity portfolio largely tracked their benchmarks. For the fourth quarter, the T. Rowe Price Global Value Equity Fund was a detractor, as growth stocks took the stage and drove much of the year-end rally.

The 100% Fixed Income portfolio outpaced the global fixed income markets (represented by the Bloomberg Global Aggregate Index) by about 2.1% on a one-year basis. The primary driver of this outperformance in 2023 was the HSBC Global Emerging Market Govt Bond Fund, as EM debt was one of the best-performing sectors in the fourth quarter and for the year. All the funds in the fixed income sleeve outperformed the Bloomberg Global Aggregate Index on a one-year basis.

Endowus Global model portfolios (USD)

‍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 displayed strong gains in the last quarter of 2023, similar to the broad equity and fixed income markets. The 100% Equity portfolio underperformed its benchmark, the MSCI All Country World Index (ACWI) by about 1.3%. On a one-year basis, the Equity Portfolio trailed the benchmark, due to structural biases. On the other hand, the 100% Fixed Income portfolio again outperformed the benchmark Bloomberg Global Aggregate Index, this time, by half a percentage point in Q4.

The 100% Equity portfolio’s overweight allocation to the emerging markets relative to the index had been a major detractor from an asset allocation perspective. On a relative basis, the Capital Group New Perspective Fund was the strongest performer in the equity line-up in Q4. It kept pace with the MSCI ACWI and returned above 11%. During the one-year period, the fund selection was additive as the funds did relatively well in their different asset classes. However, the Portfolio’s bias towards emerging markets dragged on returns. 

The 100% Fixed Income portfolio outpaced the global fixed income markets (represented by the Bloomberg Global Aggregate Index) by about 0.5 percentage point. The primary driver of this outperformance was the PIMCO GIS Emerging Markets Bond Fund, as EM debt was one of the best-performing sectors in the fourth quarter. The PIMCO GIS Global Bond Fund also outperformed the broader fixed income market by a slight margin. All the funds in the fixed income sleeve outperformed the Bloomberg Global Aggregate Index on a one-year basis.

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

Endowus CashUp 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 to the end of 2023, the CashUp Portfolios continued to deliver 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 delivered a 5.9% positive return and performed in line with the Bloomberg Global Aggregate Index. The negative impact of the Portfolio’s shorter duration positioning was offset by the positive effect of its credit exposure. 

The Passive Income - Plus model portfolio delivered a 5.9% positive return and performed in line with the Bloomberg Global Aggregate Index. The portfolio’s exposure to the credit market and in particular high yield bonds, contributed to relative performance. This was offset by the portfolio’s shorter duration positioning, which hurt relative performance as longer duration bonds benefited more from the rally. 

The Passive Income - Growth delivered a 7.3% positive return despite underperforming the 40-60 Equity - Fixed Income Composite Index. Both the equity portion and the fixed income portion underperformed in their respective markets. A shorter duration drove the underperformance of the fixed income component. The Portfolio’s overweight to emerging markets and Asian equities drove the underperformance of the equities component. 

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: 

Q4 2023 presented formidable challenges for China, marked by renewed regulatory concerns following a crackdown on the video gaming sector, and unfavourable manufacturing reports. In the Greater China region, Taiwan showcased more favourable returns, boosted by the Federal Reserve's dovish sentiments that revived investor confidence in growth and technology-related sectors.

Conversely, Hong Kong faced greater pressure, concluding the year as one of the world's worst-performing markets. Geopolitical tensions, regulatory pressures, aversion from Chinese markets, and ongoing COVID restrictions all contributed to Hong Kong's tumultuous year.

This challenging environment influenced the performance of the China Equity Portfolio, which struggled against market headwinds throughout the year. The portfolio’s exposure to Taiwanese equities had provided a buoy in the later part of 2023, but was insufficient to pull the portfolio out of the water.

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 final and last quarter of 2023, after experiencing underperformance in Q2 and Q3. The portfolio posted strong returns in Q4 but trailed the benchmark slightly. The severe underweight in the US, compounded by an overweight to EM versus the benchmark were the primary detractors of relative performance on an asset allocation basis. On a relative basis, the worst performing funds in the portfolio during the fourth quarter were the abrdn EM SDG Equity Fund and the Schroder ISF Global Climate Change Fund. On a one-year basis, the worst performing fund is the abrdn EM SGD Equity 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. The Technology Portfolio closed the year with a gain of nearly 46%.  

Key performance highlights: December marked a significant rebound for our Technology Portfolio, and capped off a strong fourth quarter with outperformance over the MSCI ACWI.

The favourable momentum was primarily attributed to the “Pivot Party”, with the Federal Reserve's dovish shift fueling an equities rally. This shift was particularly beneficial for smaller, growth-oriented equities within the portfolio.

The underperformance relative to the MSCI ACWI/IT index can be primarily attributed to the lower exposure to the "Magnificent Seven" stocks. This bias aligns with the portfolio's focus on not only mega-cap, established players but also smaller, underappreciated names aimed to uncover alpha opportunities and diversification benefits. While these names have faced headwinds during the year, they demonstrated their potential by their spectacular run-up in the market rally in Q4.

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 benefited from the strong year-end rally, generating a return of 9.5% in the last quarter of 2023. With the US Fed adopting a more dovish stance, growth equities responded positively. In particular, both the Allianz Thematica and Schroder Climate Change funds rebounded strongly from their drawdowns.

On a full year basis, the Future Trends Portfolio underperformed the MSCI All Country World Index. The underperformance can be attributed to three main factors. A) Lack of significant exposure to the “Magnificent Seven” stocks - The lack of significant exposure to the “Magnificent Seven” stocks is by design, part of the Future Trends Portfolio’s philosophy in identifying long-term, secular trends. B) Macro headwinds - both the healthcare and clean energy/energy transition sectors fell out of favour in 2023, as higher interest rates, rising material costs, and the Covid overhang all had a disproportionately larger impact on these two sectors. C) Fund underperformance - The BGF Nutrition Fund extended its underperformance with another negative calendar year performance. 

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

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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: 

• Endowus Q4 2023 Market Update and Outlook — The year of AI
• 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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Risk Warnings

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General risk warnings relating to collective investment schemes 

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