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Fund selection: Julius Baer, BOS, HSBC, DBS spotlight the must-have ingredients for 2024

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The prevailing trend in 2023 indicates continued interest in private assets amid a challenging year marked by a narrow selection of stocks driving equity markets. In addition, high interest rates prompt the question of whether the appeal of public bonds or private debt solutions remains stronger.

Looking ahead to 2024, we asked private banks how their product shelves compare to the strategies employed in 2023. And what are some of the key trends influencing the direction of their product offerings for the new year.

What do fund selectors think is the right blend of ingredients in 2024? Here’s what they shared.

Julius Baer

Cheryl Tan, Julius Baer

For Cheryl Tan, the head of fund specialists for Asia Pacific, managing volatility and maintaining flexibility to capture attractive tactical investment opportunities were the cornerstones of Julius Baer’s core-satellite approach to fund selection in 2023.

In 2024, Tan will maintain recommending a well-diversified core portfolio, skewing towards quality growth versus defensive equities. And building some exposure to higher growth-oriented thematic funds in trends like artificial intelligence, biotechnology and energy transition.

“As we approach the end of the current monetary policy tightening cycle, our appetite for longer duration bond funds has increased slightly but we remain focused on quality investment grade credits given attractive real yields,” Tan said.

“Tail risks and resultant volatility coupled with higher interest rates and reduced correlations bode well for relative value hedge fund managers adopting market neutral strategies across asset classes, which remain our preference heading into 2024,” she added.

Bank of Singapore

Yazid Mahadi, Bank of Singapore

Bank of Singapore has been encouraging clients to stay invested and pad their investment portfolios with an allocation to alternatives while seeking out diversification through lower correlation to traditional asset classes.

While the bank still expects a mild recession in the US next year, its 2024 house views have taken a slightly more risk-on stance. “We believe that the investment outlook appears broadly favourable, off the back of a potential Fed pivot that is likely to set off reflationary effects on asset prices,” explained Yazid Mahadi, the head of fund selection.

In fixed income, the private bank favours solutions which can produce an attractive distribution yield and still possess a high credit quality portfolio, whereas in equities, it has introduced more value-oriented strategies to the product shelf.

Bank of Singapore prefers quality growth and defensive value sectors, alongside Japanese equity. On the thematic side, it likes long-term mega trends such as artificial intelligence and clean energy.

“In private markets, clients have turned to private credit, secondaries, and infrastructure to augment resilience in their portfolio,” Mahadi added.

HSBC Global Private Banking

Lina Lim, HSBC

HSBC is anticipating cash yields and interest rates peaking in 2024. Consequently, it is expecting investors to begin reallocating their portfolios from cash to high-quality bonds and large-cap equities with attractive earnings potential.

“In general, core long-term global multi-asset portfolios have consistently outperformed cash over market cycles, and we anticipate the same trend as we enter the next year,” shared Lina Lim, regional and Hong Kong head of discretionary and funds, investments and wealth solutions, Asia Pacific.

“Furthermore, in terms of specific investment opportunities and structural trends, New India has emerged as a compelling theme that has captured the attention of global institutional investors.”

From a risk budgeting perspective, HSBC is recommending clients adopt a balanced approach, which can be achieved through multi-asset investments and active management for targeting specific opportunities like India. “This approach will help navigate short-term market volatilities while aiming for long-term growth,” Lim added.

DBS Private Bank

John Ng, DBS

DBS envisions that 2024 will not be materially different for them in terms of fund offerings. Since mid-2023, the bank has been encouraging clients to reduce their over-concentrations in cash and invest in larger cap equities and quality fixed income.

“For 2024, with the consensus view of a more lenient Fed, the most natural call would be in fixed income, but given the chance of a recession, quality bonds and better credit selection is still preferred,” said John Ng, head of funds investments.

“Asia has also been out of favour for some time, given the economic slowdown in China. That being said, the Chinese government has been seen to be stepping in more recently to regain investor confidence – which may reverse its fortune. We continue to be watchful with regard to Asia funds,” he added.

Ng is also expecting the love for private assets to continue into 2024, and thematic funds investing in technologies for carbon emission reduction or transition energy to continue to be a focus for DBS.

“Knowing that the pure, listed decarbonisation universe is still growing, relevant stock selection and portfolio construction will be important to avoid any chance of greenwashing. However, private asset investment opportunities might give investors an avenue to engage deeper in this growing sector,” recommends Ng.

Interested in events related to Fund Selection?

Contact [email protected] to express your interest in attending APB Intensive. The event is a high-powered, quickfire virtual session, where select fund houses will have just 8 minutes each to pitch their latest investment convictions and product solutions.

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