Q2 2023 Portfolio performance
- UOBAM Megatrends portfolio returned 6.9% for the second quarter of 2023.
Portfolio returns (% in SGD terms) and ETF weight (%) 31 March 2023 – 30 June 2023
| Portfolio Themes | Return (%) | Weight (%) |
| Changing Demographics | ||
| iShares Global Healthcare ETF | 4.5 | 15.9 |
| Global X Millennial Consumer ETF | 8.8 | 11.6 |
| Columbia Emerging Markets Consumer ETF | 2.9 | 5.1 |
| Total | - | 32.6 |
| Environmental | ||
| Invesco MSCI Sustainable Future ETF | 1.8 | 9.7 |
| Vaneck Low Carbon Energy ETF | 2.9 | 10.2 |
| First Trust Water ETF | 8.0 | 13.5 |
| Total | - | 33.4 |
| Digital | ||
| Amplify Online Retail ETF | 6.8 | 7.0 |
| First Trust Nasdaq Cybersecurity ETF | 8.4 | 14.0 |
| Global X Artificial Intelligence and Technology ETF | 15.9 | 11.1 |
| Total | - | 32.1 |
| Overall Portfolio | ||
| 3 months (31 Mar 2023 – 30 Jun 2023) | 6.9 | - |
| Since inception (5 Sep 2022 – 30 Jun 2023) | 5.7 | - |
Source: Factset/Bloomberg/UOBAM. Portfolio returns as at 30 June 2023. Exchange Traded Fund (“ETF”) average weights from 31 March 2023 to 30 June 2023, cash remains at approximately 2.0%.
The information about asset allocation provided herein are subject to change at the discretion of UOBAM without prior notice. Past performance of the portfolio or UOBAM and any past performance, prediction, projection or forecast on the economy or markets are not necessarily indicative of the future or likely performance of the portfolio or UOBAM. Returns are calculated on a single pricing basis.
Breakdown By Theme
1) Changing Demographics
Performance
| Return (%) | Weight (%) | |
| iShares Global Healthcare ETF | 4.5 | 15.9 |
| Global X Millennial Consumer ETF | 8.8 | 11.6 |
| Columbia Emerging Markets Consumer ETF | 2.9 | 5.1 |
| Total | - | 32.6 |
Source: Factset/Bloomberg/UOBAM. Returns from 31 March 2022 to 30 June 2023.
Past performance of the portfolio or UOBAM and any past performance, prediction, projection or forecast on the economy or markets are not necessarily indicative of the future or likely performance of the portfolio or UOBAM. Portfolio returns on the scheme is calculated on a single pricing basis.
Market Development
The healthcare theme continues to be one of the weakest themes as investors switched out from defensive sectors into “growthier” sectors such as technology. Investors’ risk appetite grew as inflation in the US moderates and interest rates stabilised, which benefitted growth stocks. Meanwhile, defensive sectors such as healthcare and utilities lagged.
Moderating inflation also allowed the consumer discretionary sector to make further gains after a strong first quarter, benefitting the Global X Millennial Consumer ETF. However, the Columbia Emerging Markets Consumer ETF did not perform as well. Disappointing Chinese economic data sparked concerns about the durability of the country’s post-COVID recovery and Chinese consumer confidence remains low.
Outlook
The outlook for the healthcare sector remains positive due to reasons such as attractive valuations, strong fundamentals, and robust innovation. An aging population and increasing use of new technology have boosted the sector. Earnings remain robust and resilient which would provide a strong buffer in a potential recessionary environment. For the consumer discretionary sector, moderating inflation in the US has helped to ease the worries of consumers. US consumer sentiment is higher compared to the second half of 2022. However, a potential recession may increase unemployment, erode consumer savings, and put pressure on consumer spending growth. In China, the government provided stimulus measures in June 2023 in an attempt to boost consumer spending and revive its flagging economy. China also remains committed to transit the country to a consumption-driven growth model.
2) Environmental
| Return (%) | Weight (%) | |
| Invesco MSCI Sustainable Future ETF | 1.8 | 9.7 |
| Vaneck Low Carbon Energy ETF | 2.9 | 10.2 |
| First Trust Water ETF | 8.0 | 13.5 |
| Total | - | 33.4 |
Source: Factset/Bloomberg/UOBAM. Returns from 31 March 2023 to 30 June 2023.
Past performance of the portfolio or UOBAM and any past performance, prediction, projection or forecast on the economy or markets are not necessarily indicative of the future or likely performance of the portfolio or UOBAM. Portfolio returns on the scheme is calculated on a single pricing basis.
Market Development
The Environmental theme’s performance was positive for Q2 2023. The investment in First Trust Water ETF performed well as a few of the ETFs top holdings delivered earnings that beat analysts’ expectations. One of the top holdings of the theme, Tesla, surged more than 20% as delivery and production numbers beat expectations. However, other holdings such as Enphase Energy did not perform as well. The stock continued to fall in the second quarter after surging in 2022 as valuations became too expensive and earnings did not meet expectations. Nonetheless, we continue to see the environmental theme having strong growth potential as the world moves onwards towards a net-zero target.
Outlook
The demand for renewable energy has continued to grow, yet global investment in clean energy is still far below where it needs to be. Enterprises and government agencies have been trying to close the gap, and are directing funding towards achieving new energy sources and lower carbon footprints given climate impact concerns and the limited supply of traditional energy sources. The share of renewables in global power generation has continued to rise, and in the last two years, renewables have grown more than the combined increase in coal and natural gas supplies, according to BP1. From vehicle electrification to clean energy transformation, the structural demand for renewables would accelerate. With such structural tailwind from the global energy transition, we remain positive on the outlook of investing in renewable and efficient technologies.
3) Digital
Performance
| Return (%) | Weight (%) | |
| Amplify Online Retail ETF | 6.8 | 7.0 |
| First Trust Nasdaq Cybersecurity ETF | 8.4 | 14.0 |
| Global X Artificial Intelligence and Technology ETF | 15.9 | 11.1 |
| Total | - | 32.1 |
Source: Factset/Bloomberg/UOBAM. Returns from 31 March 2023 to 30 June 2023.
Past performance of the portfolio or UOBAM and any past performance, prediction, projection or forecast on the economy or markets are not necessarily indicative of the future or likely performance of the portfolio or UOBAM. Portfolio returns on the scheme is calculated on a single pricing basis.
Market Development
The Digital theme continues to be the best performing theme in the second quarter of 2023. After being beaten down in 2022 due to rising interest rates, it continued its recovery in the second quarter as inflation and rate hike expectation moderate. Mega-cap technology names such as Apple, Microsoft and Nvidia performed well due to growing appetite for growth stocks. Apple became the first company to hit US$ 3 trillion market capitalisation. Also, Artificial Intelligence (AI) related stocks soared after Nvidia predicted strong demand for its chips. This benefitted the Global X Artificial Intelligence and Technology ETF as it became the strongest performer in the portfolio year to date, rising close to 40%.
Outlook
The impact of the digital trend is profound and game changing. New digital business opportunities are expanding at a rapid pace and the last two years have marked a shift in the evolution of the world’s digital readiness. We continue to see strong structural growth in the digital space due to advancements in artificial intelligence, and the shift in consumption from physical retail outlets to online, thus driving a strong demand for digital infrastructure to support the growth. Since the proliferation of artificial intelligence engines such as ChatGPT, more companies are trying to incorporate AI in their products or to enhance their workflow and improve productivity. As such, we remain positive on the outlook of investing in the digital space.
1BP Statistical Review of World Energy 2022
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