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Diversification will drive absolute return: Nan Fung Trinity, HSBC GPB

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Entering 2023, global diversification still sits at the centre of the investment focus, especially for  discretionary portfolio management (DPM), according to speakers at the Asia Financial Forum on Thursday (January 12).

Helen Zhu, Nan Fung Trinity

“If you look back specifically to 2022, just by looking at  performance, [a] multi strategy and globally diversified portfolio would have done better than a single country or single sector strategy,” Lina Lim, regional and Hong Kong head of Discretionary and Funds, Investments & Wealth Solutions, Asia Pacific, HSBC Global Private Banking, told the panel discussion, adding that global diversification is important, not just for 2023 but for portfolios in the long term.

One of the strategies that performed well last year for Nan Fung Trinity, the investment arm of Nang Fung Group, was adding income equities to the overall portfolio to diversify traditional bonds and equity investment.

“Instead of having bonds, which we felt were extremely expensive, we ended up buying a bunch of Chinese income stocks in Hong Kong, which were yielding like 7%.  For those investments, we knew that they had stable free cash flow,” according to Helen Zhu, managing director & CIO at Nan Fung Trinity (HK), who formerly the head China equities at BlackRock.

Lim added that, in different market cycles, there are always benefits to diversification but one has to be careful be avoiding sectors concentrations.

Do not look back

Zhu also noted the importance of thinking ahead about potential investments.

“One of the most common mistakes that I see in investment in general, is really buying whatever worked best last year,” she said, “So I think a lot of these times you have to look for the next opportunity rather than just try to push the momentum or whatever has already been working.”

“One should focus on the diversification of your overall return and the risk profile of your portfolio,” Lim said. “Adding something new” never hurts, in her view

“You could add certain access into certain investments that you may not be able to have previously. If investors can take away some good lessons from 2022, in alternative space, it is really to allocate some new asset classes,” Lim said.