Endowus model portfolios — Q2 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 second quarter of 2023.

Endowus Global model portfolios

‍About the 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 generated positive returns for Q2 2023 and the year-to-date period. However, due to structural headwinds, the 100% Equity portfolio (5.5% return in Q2) underperformed its benchmark, the MSCI All Country World Index (ACWI) — the portfolio returned 5.5% in Q2, versus the index’s 6.2% return. On the other hand, the 100% Fixed Income portfolio had a strong Q2 2023, with a 0.5% return, maintaining its lead over the benchmark Bloomberg Global Aggregate Index — which returned 0.1% in Q2 — in both the second quarter and year-to-date periods.

The 100% Equity portfolio’s overweight allocation to the emerging markets relative to the index and its slight small-cap bias both hurt relative performance in the second quarter. On a relative basis, both the Capital Group New Perspective Fund and the Schroder Global Emerging Markets Opportunities Fund were some of the strongest performers in the equity line-up — they kept pace with or, in the case of Schroders, outperformed their respective benchmarks.

The 100% Fixed Income portfolio outpaced the global fixed income markets (represented by the Bloomberg Global Aggregate Index) by about 0.4 percentage point. The primary driver of this outperformance was the PIMCO GIS Income Fund, which had a shorter duration relative to the index during Q2. The PIMCO GIS Emerging Markets Bond Fund also outperformed the broader emerging markets (EM) fixed income market by a slight margin.

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

Endowus Cash Management model portfolios

‍About the Cash Management model 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: During the second quarter of 2023, the Endowus Cash Management model portfolios continued their positive momentum, building on their strong performance in the first quarter. It is important to note that yield levels are showing signs of peaking as the market anticipates the conclusion of the rate hike cycle across various markets.

In the current market environment, both model portfolios — Cash Management - Simple and Cash Management - 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. Cash Management - 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 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 Cash Management model portfolios, along with any other investment products on Endowus, are not capital protected and their values may rise, as well as fall.

‍Read more: Introducing Cash Management model portfolios: earn more on your cash with no lockups

Endowus Passive Income model portfolios

‍About the 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 eked out a positive return of 0.4% in the second quarter, performing in line with the global fixed income market (as represented by the Bloomberg Global Aggregate Index), which posted a 0.1% return. The biggest contributors included the Steady portfolio’s allocation to emerging-market bonds, as well as good performance from the PIMCO GIS Income Fund, which is a multi-sector, flexibly managed fixed income fund. 

The Passive Income - Plus model portfolio returned positively, at 0.8%, and outperformed the global fixed income market. This was primarily due to the Plus portfolio’s allocation to emerging-market bonds and high-yield bonds. 

The Passive Income - Growth model portfolio delivered a positive return of 1.8%, albeit lagging the 40-60 Equity - Fixed Income Composite Index, which returned 2.5% for the quarter. The Growth portfolio’s tilt to emerging markets/Asia was a drag on relative performance in the equity component. The fixed income portion of the portfolio, however, outperformed the global fixed income market.

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: It 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: The China Equities model portfolio posted a negative returns, of -10.4%, in the second quarter as negative sentiment loomed over the China equity market. The portfolio underperformed the MSCI China All Shares Index (-9.9% return) by about 0.5 percentage point in Q2 2023. Over the quarter, the portfolio’s underweight to consumer discretionary names coupled with strong stock selection within the sector contributed positively to performance. On the other hand, its underweight to financials and negative stock selection within the sector, detracted. The portfolio’s exposure to Greater China equities in Hong Kong, Taiwan, and even Singapore added resilience to its performance by mitigating some of the negative impact from the onshore market.

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 faced challenges on multiple fronts in the second quarter of 2023, after having outperformed its benchmark, the MSCI ACWI, in the first quarter. The portfolio posted a 3.9% return in the second quarter, lagging the index’s 6.2% return. Even though the strong growth tilt of the portfolio helped to an extent in Q2, it was not large enough to mitigate the negative impact from the severe underweight in the US versus the benchmark. The slight overweight to emerging markets and the marginal small-cap bias also detracted.

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 Global Technology model portfolio thrived during the tech stocks rally — driven by artificial intelligence (AI) — that dominated the first half of 2023. The portfolio delivered a positive return of 10.5% in the second quarter this year, outperforming the broader market — as represented by the MSCI All Country World Index, which returned 6.2% — but slightly underperforming the MSCI ACWI Information Technology Index, which posted a 13.7% return.

The portfolio’s underperformance as compared to the MSCI ACWI Information Technology Index was due to the portfolio’s tilt towards smaller, non-US companies, as well as its larger allocation to non-momentum driven names.

Nevertheless, the portfolio was able to participate in the recent rally through its underlying funds, such as the Franklin Technology Fund and the AllianzGI Global Artificial Intelligence Fund, which offer significant exposure to larger-cap technology companies and AI-related themes.

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 model portfolio generated a positive return of 3.3% in the second quarter, as markets rallied on the back of enthusiasm over artificial intelligence (AI) and the moderation of inflation numbers in the US. However, the portfolio’s return was lower than the 6.2% return of the MSCI All Country World Index, due to the portfolio’s lower exposure to the key mega-cap companies that benefited strongly from the attention on AI.

The BlackRock BGF Nutrition Fund was the main drag on the portfolio’s performance, having posted a negative return for the quarter. It has been a tough first half of the year for the agriculture sector as a whole, with weak demand in the first quarter and an uncertain outlook for the rest of the year. All other funds in the Future Trends model portfolio had a positive quarter, with the AB Sustainable Global Thematic Portfolio Fund performing the most strongly.

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

<divider><divider>

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

With digital wealth platform Endowus, you can plan and manage your money by investing in globally diversified, intelligent, low-cost model portfolios seamlessly.

You can use these pre-populated 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

<divider><divider>

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.

Opinions

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