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

What is the Future Trends model portfolio on Endowus?

Selecting the right investment products to build a diversified portfolio can be time-consuming. That’s why we are excited to introduce the Future Trends model portfolio, to enable you to grow your wealth and reach your goals effortlessly with Best-In-Class strategies at low and fair fees.

The Future Trends model portfolio is made up of multiple unit trusts, also known as mutual funds, that are curated by the Endowus Investment Office.

An investor can use this pre-populated template 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 Endowus Future Trends model portfolio is a 100% equities portfolio aimed at achieving high growth expectations from global themes that are backed by strong structural trends. 

Consisting of six Best-In-Class Funds spanning the major themes of healthcare, technology, industrials and more, the model portfolio is meant for investors who are keen on capturing its attractive potential growth rates, while enjoying its diversification and differentiation factors. The portfolio also presents the opportunity to invest in the forces of change — sustainably and meaningfully.

The Future Trends model portfolio is made up of funds investing in one or more thematic trends. These future trends are powerful, driving forces that have the potential to reshape the way we think and live by changing the global economy, businesses, and environment. 

For investors, this also creates unique opportunities to buy into long-term trends and themes that could generate outsized returns over a long period of time as these trends manifest themselves and become the norm in our society and the economy. The companies leading and driving these changes often benefit and generate good long-term returns.

The following table shows the underlying funds of the model portfolio.

Why invest in the Endowus Future Trends model portfolio

The theme of future trends or megatrends is an attractive investment opportunity backed by several positive characteristics:

• Attractive high growth above trend economic growth
• Diversification and differentiation
• A sustainable approach

1. Attractive high growth above trend economic growth

Many emerging themes have potential growth rates that far outstrip that of gross domestic product (GDP) growth, due to the speed of adoption and the relative size of untapped markets. 

Popular trends such as digital health data and electric vehicles (EVs) are projected to grow at an annual rate that is more than five times that of the US economy’s GDP, due to the rapid development and adoption of these two segments. 

These rapid growth rates provide opportunities to select winners that will benefit from the growing adoption and rapid market expansion of their underlying products and services.

Other prevalent themes — such as the need for infrastructure spending and water treatment — reflect essential needs and require significant amounts of investments. 

For example, in the US, a US$1 trillion infrastructure bill was passed to rebuild deteriorating roads and bridges and fund new climate resilience and broadband initiatives. The White House has also said that climate change could cost the US federal budget about US$2 trillion per year by the end of the century. US President Joe Biden’s budget proposal for 2024 includes some US$24 billion to help increase climate resilience and conservation.

2. Diversification and differentiation

Investors keen on the future trends or megatrends theme can look for exposure to a wide variety of globally competitive companies that are often leaders in their field. The breadth provides for broad diversification opportunities across a few key trends and more than 10 other sub-themes. 

Here are some key features of the Endowus Future Trends model portfolio:

• More than 500 companies represented in the portfolio across a multi-manager fund of funds approach.
• Many companies are under-researched or under-represented by global equity indices, thus increasing the possibility of alpha generation.
• “Crowded” companies such as Meta (Facebook), Amazon, Alphabet (Google), and Tesla are either not included or have a very small weight. This creates differentiation and also makes the Future Trends model portfolio a complementary portfolio to the Global Technology model portfolio.

As the table above shows, none of the funds in the Future Trends model portfolio have a significant overlap with each other. Importantly, none of the funds have a significant overlap with the general MSCI All Country World Index (ACWI), the MSCI World Information Index, and the MSCI World Health Care Index.

3. A sustainable approach

The United Nations (UN) Sustainable Development Goals (SDGs) are a collection of 17 interlinked global goals designed to be a "blueprint to achieve a better and more sustainable future for all". The SDGs were set up in 2015 by the UN General Assembly and are intended to be achieved by the year 2030.

Issues such as human rights abuses, climate change, and inequitable social structures seriously threaten the long-term performance of economies, investors’ portfolios, and the world in which beneficiaries live. Expectations from beneficiaries, clients, governments and regulators over how investors should respond have changed — driven by increased visibility and urgency around many of the SDGs.

The urgency to deliver on the SDGs has only increased due to the Covid-19 pandemic, with several governments recognising that the SDGs can act as a guide to the global response, “to make sure that nobody is left behind”.

With a combined US$89 trillion in assets under management, PRI signatories can play a unique role in helping the world to meet the SDGs — individually, and in collaboration with fellow investors and broader stakeholders. 

A focus on outcomes allows investors to understand the risks and opportunities that are likely to exist in the transition to an SDG-aligned world. Investors can:

• Identify opportunities in business models, supply chains and products/services;
• Prepare for legal and regulatory developments;
• Protect their reputation and licence-to-operate;
• Meet commitments to clients and beneficiaries — and communicate progress;
• Consider materiality over longer time horizons, to include transition risks, tail risks, financial system risks, and more;
• Minimise the negative outcomes and increase the positive outcomes of investments.

A majority of the Future Trends model portfolio’s underlying strategies are either aligned with sustainable development goals or are heavily influenced by environmental, social, and governance (ESG) factors. This alignment not only impacts the society positively, but is also self-serving as it represents an attractive source of alpha generation.

We believe it is important to expose the Future Trends model portfolio to key long-term themes and trends that align with long-term SDG goals and the ESG sustainable theme, similar to the Endowus Sustainability - Equities model portfolio.

What are the risks of investing in Future Trends?

As the Future Trends model portfolio is thematic in nature, it is expected to have a strong growth bias and typically invest in companies that have the potential to generate outsized returns in the long run. However, this growth bias can result in periods of drawdowns, such as when market conditions are not conducive for growth-oriented companies or segments. 

Additionally, while the model portfolio is well-diversified, it can have a more concentrated exposure to certain geographies or sectors, compared to a broader index like the MSCI All Country World Index (ACWI). Invested themes may also take longer than expected to fulfil their potential, so there is a risk that the model portfolio underperforms the market over certain time periods. 

Therefore, when considering an investment into the Future Trends model portfolio, investors should be aware of the additional risks involved. The model portfolio should be seen as a satellite allocation that complements a broader, core portfolio, and it may be more suitable for investors with a greater risk appetite. 

How has the Future Trends model portfolio performed?

The Endowus Future Trends model portfolio has slightly outperformed the MSCI All Country World Index (ACWI) since its inception, with roughly the same levels of volatility. Due to the portfolio’s growth bias, when market sentiment is bullish, the portfolio would typically outperform the index. However, on the flipside, when sentiment turns cautious, the portfolio would likely lag the Index as well. 

For example, when equity markets recovered after the Covid-induced drawdown in March 2020, most of the portfolio’s underlying funds performed strongly. The subsequent rapid interest rate hikes by the US Fed then led to a reversal in market sentiment — correspondingly, these funds experienced larger declines as compared to the index.

Major issues experienced in 2022 have further highlighted the importance of certain themes, such as infrastructure spending, food security, climate change, and artificial intelligence. As a result, the Future Trends model portfolio, with its exposure to these themes, should continue to benefit from the ongoing structural changes.

How we built the Future Trends model portfolio

The Endowus Investment Office is a team of investment experts with more than 150 years of experience combined, across public and private market investing, family offices, and wealth management. The team screens the universe of unit trusts, also known as mutual funds, and curates a final list by implementing a strict, institutional-grade screening process that is rigorous, thorough, and continuous. 

The process, known as SMART+, vets funds across categories to bring you only those that are Best-In-Class, and the team monitors the funds regularly in terms of performance.

For the Future Trends model portfolio, we have selected the six Best-In-Class Funds because of their specific thematic focus and the portfolio managers’ ability to translate the thematic focus into actual, solid investment returns. 

The model portfolio is built around three core multi-thematic funds — the AB Sustainable Global Thematic Portfolio Fund, Thematics Meta Fund, and Allianz Thematica Fund. These three main funds utilise a multi-thematic approach designed to provide investors with a robust exposure to the leading and emerging themes with the highest opportunities to generate sustainable returns. These three funds are then supplemented with three other single-theme funds that reinforce the future trends theme, such as nutrition, climate, and healthcare.

How to create your own Future Trends model portfolio on Endowus

Here are a few simple steps to create the Endowus Future Trends model portfolio via Fund Smart.

Step 1: Login to your Endowus account. In the My Goals section on the sidebar, click on “+” to add a goal.

Select your investment horizon and objective for this goal, and click on “Browse funds''. Don’t have an account with Endowus Hong Kong? Get started here.

Step 2: Select a model portfolio you’re interested in, by clicking “Preview”.

You will see a list of model portfolios that are recommended for you, depending on your investment horizon, investment objective, and risk profile. (This means you might not see all of the available model portfolios if your risk profile is lower.)

Step 3: Check through the portfolio details. Click on “Continue with portfolio” if you wish to proceed.

Here, you will see details of the model portfolio such as the description, risk analysis, fees, performance, and allocations of its underlying funds. After you click on “Continue with portfolio”, you can still add funds, remove funds, and modify allocations if you want to.

‍Step 4: Allocate your funds in this portfolio, and review an analysis of it. Click on “Continue” to proceed.

You can either invest in the model portfolio as it is, or modify the allocations, add funds, and remove funds to suit your preferences and needs. 

Step 5: Set up your investment. Input the sum you want to invest, and decide whether this will be a one-time or recurring monthly investment. Click on either “Continue to review” or “Save goal and invest later” to proceed. 

On this page, you will see the projected outcomes, historical performance, selection criteria, underlying holdings, and warning statements. Make sure to review the warning statements carefully. You can still modify or stop any recurring monthly investments later. 

Remember that return is proportionate to risk. You should consider your risk tolerance — for example, how much money can you tolerate losing in a certain time period, in a worst-case scenario? The portfolio should then suit your risk appetite, as well as your investment timeline and financial goals.

Should you invest in the Future Trends model portfolio or in single funds?

The Endowus Investment Office has designed the asset allocation, selected the funds, and optimised the fund allocation for the Endowus Future Trends model portfolio. The portfolio is diversified and optimised for each level of risk.

Investors can also buy single funds on the Fund Smart platform as a way to complement your existing core investments. If you want to get additional exposure to certain asset classes, geographies, sectors, themes or factors, you can select the additional funds via Fund Smart.

At Endowus, wealth management for everyone

The Future Trends model portfolio offers investors a convenient and effective way to build a diversified portfolio that can help to minimise risk and potentially increase returns.

With digital wealth platform Endowus, investing is now made low-cost and accessible for every season in life, investing goal, and risk appetite. Make time your biggest asset and begin your investing journey with Endowus today. Start investing towards your goals from just HK$10,000.

At a low, fair, and transparent fee, both retail and professional investors can access Best-In-Class Funds and stand on the shoulders of financial giants. And with our industry-first 100% Cashback on trailer fees, save up to 50% or more on your investment fees.

Get more details about the Future Trends model portfolio here. For an overview of all the funds available on the Endowus Fund Smart platform, refer to our investment funds list. Follow this link to get started with Endowus HK.

Read more:

• An overview of the Endowus model portfolios
• Introducing the Endowus HK team
• Why invest through Endowus
• What is Fund Smart?

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Risk Warnings

Investment involves risk. Past performance is not an indicator nor a guarantee of future performance or returns. Projected performance or returns is not guaranteed to materialise. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down. Individual stock performance does not represent the return of a fund.

General risk warnings relating to collective investment schemes 

Before making an investment decision, you are reminded to refer to the relevant prospectus/ offering document for specific risk considerations and related fees and charges. Funds are not a bank deposit and not capital guaranteed, and is subject to investment risks, including the possible loss of the principal amount invested. Some of the funds also involve derivatives. Do not invest in them unless you fully understand and are willing to assume the risks associated with them.

Complex Products

Some of the funds contained in this article are complex products and investors should exercise caution when investing in these products. Though these products have been authorised by the SFC, authorization does not imply official recommendation. SFC authorization is not a recommendation or endorsement of a product nor does it guarantee the commercial merits of a product or its performance.

Opinions

Whilst Endowus HK Limited (“Endowus”) has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies or typographical errors.  Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this material are subject to market influences and contingent upon matters outside the control of Endowus HK Limited (“Endowus”) and therefore may not be realised in the future. Further, any opinion or estimate is made on a general basis and subject to change without notice. In presenting the information above, none of Endowus HK Limited, its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You may also wish to seek financial advice through a financial advisor or the Endowus platform and independent legal, accounting, regulatory or tax advice, as appropriate.

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Product Risk Rating: Please note that any product risk rating (the “PRR”) provided by us is an internal rating assigned based on our product risk assessment model, and is for your reference only. The PRR is subject to change from time to time. The PRR does not take into account your individual circumstances, objectives or needs and should not be regarded as advice or recommendation to purchase, hold or sell any fund or make any other investment decisions. Accordingly, you should not solely rely on the PRR in making your investment decision in the relevant Fund.

This article  has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.