Enhancements to our Technology Portfolio

In the high-growth technology sector, investor sentiment often drives volatile market movements. While we embrace some level of volatility in this growth-oriented sector, we believe it is important to express our technology satellite position in a more balanced manner, considering both risk and return. 

This approach enables us to capitalise on unique alpha opportunities and outperform the broader market. Our goal is to achieve improved risk-adjusted returns while minimising downside risk. As such, the latest recommended portfolio change focuses on enhancing risk-adjusted returns from our technology exposure in the long term. This will be achieved by increasing allocations to higher-quality companies and reducing weights on more volatile technology investments.

* The latest recommended enhancements to the Technology Portfolio are as of November 2024. The RPC is part of Endowus’ commitment to source funds that will optimise your portfolios. You can accept or reject the recommended changes (read more in the FAQ section).

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Funds in the Technology Satellite Portfolio

The rationale behind key changes

The growing presence of AI exposure in broader tech-themed funds

While we continue to value the strengths of the Allianz Global Artificial Intelligence Fund, our Portfolio is shifting focus towards a more broad, diversified portfolio to maintain flexibility and adaptability in a dynamic market environment. Additionally, The growing development of AI has prompted us to believe that AI-related opportunities can be well-represented within wider technology-focused funds. Thus, Allianz Global Artificial Intelligence Fund is removed from the Portfolio. 

Enhancing the risk-adjusted return by reducing the concentration in small-cap stocks

We continue to hold a strong conviction in the BlackRock BGF Next Generation Technology Fund, recognising its value as a diversifier through its unique portfolio of global investments in small, emerging companies, and its potential to generate alpha within a diversified portfolio, particularly during risk-off environments. 

However, we are reducing its allocation to 5% (from 19%) to decrease concentration in the global smaller-cap space, which tends to be more volatile compared to large-cap and more established companies. This adjustment aims to enhance the overall risk-adjusted return of the Technology Portfolio.

Building a “Core-like” Technology allocation

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Comparing the old and new Portfolios: Allocation breakdown

Geographically, the new Technology Portfolio will remain similar to its previous version, with a primary allocation of approximately 70-80% to the US. 

The remaining portion of the portfolio will be broadly diversified across markets in Europe and Asia. This approach enables the portfolio to take advantage of the dominant growth in the US technology sector, while also participating in the potential offered by markets outside the US.

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In particular, non-US exposure is relatively limited in global technology market indices, making the Endowus Technology Portfolio an attractive way to invest in the technology market in terms of geographical diversification.

The new portfolio also features a slight increase in mega and large-cap allocations, while preserving a similar overall size distribution by maintaining a diverse mix of mid and small/micro-cap stocks, including private companies. 

In comparison to global technology market indices, which are predominantly mega and large-cap focused, this portfolio allows investors to benefit from a more diverse range of technology companies, spanning both industry leaders and innovative newcomers.

Expected results of the optimisation

While hindsight often leads to better-optimised returns compared to the previous iteration, the new Portfolio is believed to deliver improved risk-adjusted returns in the long term, which notably include greater allocations to higher-quality companies and reduced weights on more volatile technology investments.

Moreover, the quality of a fund's process and management team holds significant importance, extending beyond mere performance. We also maintain a steadfast belief in these funds’ capacity to outperform over the longer term, driven by active allocations across technology themes and equities.

From the tables, we can observe several improvements:

• Better risk-adjusted returns, especially over the longer term
• Better risk management in terms of maximum drawdown, rolling 12-month worst returns, and volatility

Watch the webinar

Recommended portfolio changes for other Endowus Portfolios (2024)

• Endowus Flagship CPF Portfolios: Introducing Dimensional
• Endowus ESG Portfolios: Invest consciously with purpose
• Endowus Megatrends Portfolio: The power of the future
• Introducing Endowus Real Assets Portfolio

Frequently asked questions

1. How do I accept the Recommended Portfolio Change?

You can view and opt in for the changes via any of the 3 options below:

• Click ‘Login’ from the Recommended Portfolio Change email you would have received.
• Click the notification bell on your Dashboard, then select ‘Review recommendations’.

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• Select the relevant goal’s page under the My Goals section, then select “View recommended changes” under ‘Manage goal’. You can find a video tutorial on how to do so here.
• The entire process will take 5 to 10 business days to complete. A full redemption cannot be performed until the rebalancing process is completed.

Read: FAQ for Recommended Portfolio Change. 

2. Why does Endowus recommend portfolio changes?

Our Investment Committee is constantly evaluating the funds in our advised portfolios and the wider investment universe. If we feel that other funds can better express our asset allocation views at a lower cost or improve the risk-return profile of the portfolio, we will recommend a portfolio change to our clients.

Watch: How do Endowus recommend portfolio changes work?

3. What is the Endowus Core-Satellite approach?

Most investors should begin with an allocation to the Endowus Core strategies. All core portfolios must be globally diversified, have a strategic passive asset allocation (SPAA), and be low-cost. It is advisable that all investors begin with a meaningful asset allocation to core portfolios for their essential financial goals (with Cash, CPF, and SRS) before extending their investment holdings to Satellite positions.

Read more: How to approach core and satellite investing with Endowus

4. Why is the recommended portfolio change suitable for me?

Monitoring the investments in your portfolio and trying to optimise for improvements can be a time-consuming and complicated affair. This is where working with a trusted financial adviser like Endowus can help you improve the way you invest. We represent non-institutional investors to negotiate for more efficient share classes with established fund management companies. 

Have more questions? Schedule a 1-on-1 appointment with our MAS-licensed financial advisors at any time!

Enjoy lower fees, and stronger long-term gains with Endowus

The Endowus Investment Office is constantly monitoring your advised portfolios and searching for new options that will improve these portfolios. Opt in for the recommended portfolio change today to upgrade your Portfolio.