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

What is the Global Technology 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 Endowus Global Technology model portfolio, to assist you to grow your wealth and reach your goals effortlessly with Best-In-Class strategies at low and fair fees.

The Global Technology model portfolio is built from 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 this template as it is or make changes to suit their preferences and needs.

The portfolio aims to give access to the most innovative technology and technology-related companies around the world, across various market capitalisations and sectors. It is allocated across five different funds managed by experienced technology investment teams from renowned asset managers, namely Allianz, BlackRock, Fidelity, and Franklin Templeton. Each of the funds has a distinct philosophy in the way it tackles technology investing. The resulting portfolio is cost-optimised and well-diversified to tap into various sources of returns. 

The portfolio invests primarily in traditional technology sectors such as information technology and communications services, with allocations in non-technology sectors such as financials, consumer discretionary, and industrials, where innovative companies are increasingly adopting technology to their advantage.

Geographically, the portfolio has most of its holdings in the US — which represents a large opportunity set in technology investing — but is also invested in other leading innovators and rising stars in geographies such as Asia and Europe.

Why invest in the Endowus Global Technology model portfolio

The Global Technology model portfolio can be an attractive investment option for the following reasons:

• To capture the growth of technology-related companies
• Access to a diverse portfolio with attractive historical performance
• Designed to be suitable for core-satellite investment approach

1. Capture the growth of technology-related companies

Excess exuberance around technology investing has come a notch down amid challenging market conditions — the appetite for growth-based investing such as technology has diminished, and investors have fled to park their monies in safer assets. Since the MSCI ACWI/IT Index’s peak in the 2021 post-pandemic bull market, it has come down -17.9% as of 31 March 2023, and -31.7% in 2022 alone. 

Regardless, as more investors start to position themselves for the end of the rate hike cycle, the sector has rebounded in 2023. Additionally, with valuations looking attractive after a year of sell-offs, the current timing may prove to be a good entry point for investors seeking to make a long-term investment.

Like most asset classes, the technology market has historically rewarded long-term investors. While the sector has had a fair share of crises and volatility over the years, a $100 initial investment put into the MSCI ACWI/IT Index in January 2007 (just prior to the Global Financial Crisis) would have become $522 at the end of March 2023. In other words, an investor who held on to their investment through the volatility of the technology sector over the years would have made 10.7% in annualised returns in the period.

From a more fundamental viewpoint, technology investing offers ample investment opportunities and alpha awaits for those who can successfully identify them. 

In dissecting the information technology sector, investors will notice that the industry consists of other smaller sub-sectors that each feature unique characteristics and behaviours across the market cycles. The large and diverse pool of potential investments allows fund managers to pick the best ideas leveraging their domain knowledge, relationship with industry players, and investment expertise.

Additionally, the rapid advancement of technology has meant the blurring of boundaries when it comes to technology – today, the application of technology is ubiquitous across all businesses. Given this, there are compelling cases to not only invest in the future of direct technology products and service manufacturers, but also to invest in innovative, non-technology companies that adopt technology creatively to increase their competitive advantage. 

The use of artificial intelligence (AI) illustrated below is one of such examples, and the opportunity set continues to expand with the emergence of new technologies.

Given all of the reasons combined, we think that technology will remain a key investing pillar in the global equity market.

2. Diverse portfolio with attractive historical performance

As briefly mentioned above, the Global Technology model portfolio is well-diversified across various sectors and geographies. This is by deliberate design in an attempt to smoothen out volatility in the long term, while making sure that the portfolio is still invested in the best ideas of technology investing. 

Taking a closer look at the portfolio, investors will find that it also invests into a healthy set of sub-sectors and market capitalisations to take advantage of the diversification benefit. This is why we believe the model portfolio offers a simple way to gain exposure into the various pockets of technology investing.

Additionally, tapping into the expertise of different managers also helps to identify the best ideas in technology through various ways. We have worked with fund managers who individually specialise in these various approaches to technology investing — be it large-cap, small-cap or private, US-centric or more global, or even technology with a tilt towards artificial intelligence.

In all, the portfolio has exhibited attractive historical performance*, as we will discuss below.

(*Past performance is not an indicator nor a guarantee of future performance or returns.)

3. Suitable for a core-satellite investment approach

The portfolio was designed and constructed carefully by the Endowus Investment Office, from the initial conceptualisation to analysing and selecting the underlying funds and putting them together in a portfolio.

The Endowus Global Technology model portfolio is recommended to be used as a satellite allocation to complement your core allocation. 

Technology companies represent a significant portion of global equity markets today, and chances are, you may already be invested in popular technology stocks through your core investment already.

The model portfolio is a good option for investors who would like to increase their allocation to technology-themed companies, but done in a way so that it does not meaningfully overlap with their existing technology investments on their core portfolio. This core-satellite setup is therefore designed to provide a more holistic exposure to technology for investors’ overall investment.

How has the Global Technology model portfolio performed?

The Endowus Global Technology model portfolio has demonstrated comparable performance to the MSCI ACWI/Information Technology Index, which is the closest benchmark to the portfolio in terms of investable universe – that is, global technology equities. 

In general, the portfolio has displayed “high risk, high return” characteristics, showcasing strong upsides during favourable markets, but also suffering steep downsides where there are headwinds. This is largely attributable to the portfolio having:

• An overweight to smaller and relatively less mainstream technology names; i.e. underweight to the “FAANGS”;
• A smaller allocation to  US and with more focus on global names, such those headquartered  in Europe and Asia; and
• An overall exposure to growth-oriented companies, through a focus in the technology sector and related stocks.

Performance of the Endowus Global Technology model portfolio and tech sector indices

As discussed, the portfolio displayed relatively weaker performance in the 1 year period ending March 31, 2023 due to its overweight in small cap and non-US technology names.The performance in this 1-year period has also dampened the annualised returns in the past 3, 5, and 7 years, although in the longer term, it can be seen that it has outperformed regional technology indices, which once again highlights the benefits of diversification. The 12-month rolling best returns exceed the indices’, highlighting the bull run that the portfolio enjoyed in the post-pandemic exuberance.

What are the risks?

All in all, investors are reminded that the model portfolio, due to its inherent focus on the growth-oriented technology market, and its concentrated, active stock selection approach, may be more volatile compared to investing in the index or broader market.

Given these characteristics, it is highly recommended that the portfolio be used as a satellite exposure to supplement a broadly diversified core investment portfolio. We rate the portfolio as Product Risk Rating 6 (riskiest).

How we built the Global Technology 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.

The model portfolio was then created using the five Best-In-Class Funds for tech. For weightings, these factors were considered:

• Whether the fund adopts a more resilient, “anchor” approach in tech investing, reduces short-term volatility and provides downside protection during risk-off environments;
• Whether the fund focuses on more emergent areas of tech investing, such as small/mid cap or developing tech concepts such as AI; and
• Whether the fund is concentrated or has a more diversified basket.

The Global Technology model portfolio is distinctive because it is independently constructed by Endowus, with the Investment Office employing a robust and holistic investment process.

How to create your own Global Technology model portfolio on Endowus

Here are a few simple steps to create the Endowus Global Technology 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 Global Technology 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 Global Technology 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.

Whether you’re thinking of investing in a model portfolio or in single funds, you should consider your own risk tolerance level and financial circumstances.

At Endowus, wealth management for everyone

The Endowus Global Technology model portfolio offers investors a convenient and effective way to build a diversified technology-theme portfolio that can potentially help to increase returns in the long term.

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 Global Technology model portfolio here. Read about the other Endowus model portfolios in this article.

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:

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

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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.

No invitation or solicitation

Nothing contained in this article should be construed as a solicitation, an offer to buy or sale, or recommendation, to acquire or dispose of any security, commodity, investment or to engage in any other transaction in any jurisdiction in which such solicitation, offer to buy or sale would be unlawful under the securities laws in such jurisdiction. No information included in this article is to be construed as investment advice or as a recommendation or a representation about the suitability or appropriateness of any advisory product or service; or an offer to buy or sell, or the solicitation of an offer to buy or sell, any security, financial product, or instrument; or to participate in any particular trading strategy. Investors should seek independent financial and tax advice before making any investment decision.

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.