How Can Investors Position Their Portfolio?

From a macro level, we are still positive on risk assets. Given that most of our clients have a structurally growth-centric portfolio and in the near-term, value/cyclical sectors could continue its outperformance, investors can consider adopting a value tilt through Value-oriented funds like the JPMorgan Funds - *US Value A (acc) USD and the HGIF - Europe Value PD SGD* to their portfolios. 

At a sectoral level, we also recommend re-allocating the exposure to financials, which are key overweights of Value indices, like the *Blackrock World Financials A2 USD or the iShares Global Financials ETF (NYSE:IXG)*.

However, we do not recommend investors to switch out their growth exposure entirely for Value but rather hold a combination of value and growth stocks.  

 Investors can consider the *Aberdeen Standard SICAV I Global Dynamic Dividend Fund* which integrates both styles of investing with Value at 60% and Growth at 40%.  The fund provides geographical diversification with exposure to US (50.6%), Europe (14.8%) as well as sector diversification with its top 3 sector exposure to IT (16.9%), Financials (16.4%) and Healthcare (13.0%). Its top ten holdings include large US companies that include Apple, Microsoft and Alphabet. (Source: Abrdn, 31 Mar 2022). The fund also spots a historical dividend payout of 5%, which means that investors get paid while waiting for recovery.

Parts of the fixed income market are also looking more and more attractive as yields have been rising since the start of the year. For example the latest YTM for the *Lionglobal Short Duration Bond fund is at 3.7%* (as of 2 May). Similarly for the *United SGD fund, it had a YTM of 3.55%* (as of end April) and *Nikko AM Shenton Short Term Bond fund is offering a YTM of 3%* (as of 31 March 2022). With durations of less than 3 years, these funds offer a defensive exposure in an investor’s portfolio and would help to improve the risk-adjusted returns. 

Just a year ago, in order to achieve a yield of 5% for a fixed income portfolio, we would need to allocate more than half of the portfolio allocation to high yield bonds. However, presently, we can allocate about 50% to short duration bonds, and for the rest of the allocation to investment grade bonds and a small allocation to Asian High Yield, and that could deliver the 5% yield but now investors are taking on less risk while duration is kept low.