Review of 2020

Open Calls

Despite the challenging economic environment, our market calls delivered strong returns and have broadly outperformed the global equity benchmark’s return of +11.2%.

Asia ex-Japan equities were our best-performing high conviction call, as the region contained the pandemic more effectively than the developed markets. Its economic growth was also driven by a recovering China. Global equities with high quality factors held up well as their quality shone amid the uncertainty brought by COVID-19. US consumer staples remained defensive as investors sought shelter from market volatility, while benefitting from increased demand during the lockdown period.

Among our Megatrend ideas, Artificial Intelligence (AI) and Innovation equities remained at the top, reflecting their strong growth potential demonstrated by the enabling of work and social activities via digital means amid lockdowns. China has also delivered strong returns as its earlier economic reopening and recovering domestic demand had softened the impact to corporate earnings. Healthcare continues to remain an important focus amid the pandemic. Although Healthcare continues to be driven by vaccine progress in the near-term, new developments in AI and a pipeline of new drugs to cure more diseases create strong longer-term potential for the sector.

We have initiated a new Megatrend idea – Sustainability, focusing on Environmental, Social and Governance (ESG) factors – which is rapidly gaining traction among professional investors for its emphasis on responsible investing that does not compromise on, but instead provides longer-term sustainability in investment returns.

Closed Calls

Our high conviction call on US high-yield (HY) bonds was closed after barely four months as spreads had compressed significantly. During that period, US HY bonds rose by 7.1%, but the likelihood of further upside seemed limited. Investors may want to consider reallocating to one of our Megatrend calls to participate in longer-term growth drivers.