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- CIO Barbell & I.D.E.A. strategies have outperformed benchmarks this year despite recession risks
- Since inception, CIO Barbell Strategy has outperformed its benchmark by 509 bps (170 bps YTD)
- The I.D.E.A. Strategy has outperformed its benchmark by 511 bps since inception and 34 bps YTD
- Investors are advised to re-engage the market and/or dollar-cost average as US policy rates peak
- CIO Barbell Strategy (YTD outperformance: 170 bps). The strategy is a multi-asset balanced strategy focused on secular growth and income stability, with the employment of gold as a risk diversifier. Since inception, the strategy has returned 17.9% and outperformed the benchmark (comprising 50% MSCI All Country World Net Total Return USD Index and 50% Bloomberg Global Aggregate Index) by 509 bps. On a year-to-date (YTD) basis, the strategy has returned 7.5% and this constitutes an outperformance of 170 bps.
- I.D.E.A. Strategy (YTD outperformance: 34 bps). I.D.E.A. (Innovators, Disruptors, Enablers, Adaptors) is a growth-oriented strategy investing in global secular winners of the digitalisation age. Notably, the strategy also possesses substantial exposure to “Adaptors” – old economy companies embracing digital transformation. Performance-wise, I.D.E.A. has substantially outperformed its benchmark (comprising MSCI All Country World Growth Net Total Return USD Index) by 511 bps since inception. On a YTD basis, the strategy outperformed by 34 bps.
Unique characteristics of CIO strategies:
- The portfolio takes on two outsized exposures — income generating assets and secular growth equities.
- Besides corporate bonds, we add equities that yield sustainable dividends as another source for income generation. In the present environment, most of these stocks are “value” plays with below-than-average market valuation metrics (e.g. stocks within the Financial and Energy sectors).
- On the growth end of the portfolio, we go all-in on companies that ride long-term, irreversible growth trends. Companies within Technology and Healthcare feature greatly as they are beneficiaries of a fast-ageing population and accelerated digitalisation of the world economy.
- Besides Technology companies that fall into the categories of ‘Innovators’, ‘Disrupters’ and ‘Enablers’, our holdings include companies in traditional sectors such as retail and banks, which demonstrate the ability to pivot and thrive in a fast-changing digital world. We call them ‘Adapters’.
- We believe these unique characteristics would play out in the medium to long term, resulting in both Barbell and I.D.E.A outperforming underlying market indices.
Time to re-engage the market and/or dollar-cost average. We remain constructive on the long-term outlook of risk assets heading into 2023 and our conviction is underpinned by the following factors:
- Moderation in US inflation and peaking in US policy rates
- Companies with strong fundamentals and earnings quality to outperform the broader markets, with the support of attractive valuations
- Recovery in China’s outlook and earnings outlook
Against this backdrop, we advise investors with existing positions to dollar-cost average. For those with excess cash holdings, now is the time to deploy them using a robust portfolio approach.
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