Why equities?
Post global financial crisis, interest rates remained low, investors invested in fixed income for the past seven to eight years, at times, on leveraged basis, in this respect, the bond market is overbought. Therefore we see significantly better opportunities in global equities. During times of reflation, equities perform better than fixed incomes in which the former is much more inflation-transferable.
Rising interest rates will likely cause mark-to-market loss on bonds. The time is right to rotate from fixed income into equities. In times of stress, high yield bonds’ liquidity will be lower due to a bid/ask spread (OTC market). Bonds issued by technology companies usually have low yield. The technology sector is far less sensitive to rising interest rates and oil prices than other sectors. We believe equities will provide more attractive returns to investors. Investor appetite for growth is returning and tech is poised to lead growth.
Why technology sector?
Some of the world’s most exciting companies are technology companies, Apple, Google, Facebook, Amazon, Alibaba, and lots more. These companies became top market cap companies in just 5-10 years. The technology sector offers a fertile ground for innovation and invention – an ideal place to invest in companies with higher potential for sustained growth. At the source of the information age is semiconductors which penetrate all facets of the global economy. The next decade will see the connection of these semiconductors to drive machine-to-machine connectivity. And this deluge of data will be aggregated, analysed and acted on as we enter the bold new world of artificial intelligence (AI). Every industry and public sector will be impacted by AI and those who adapt today will be tomorrow’s winner.
Companies worldwide are poised to increase capital expenditure in technology in order to stay competitive, especially in the areas of Fintech, MedTech, EdTech, RegTech, and LawTech etc. The technology sector is relatively less sensitive to rising interest rates and oil prices. In fact, cash-rich companies, such as Apple, may benefit from rising interest rates. Given this sector has relatively less headwinds, investors may consider adding more exposure to the tech sector.
Investment strategies
Our assets under management are primarily invested in global technology companies. Portfolio is constructed from the bottom-up by leveraging the fund manager, Fred Wong’s, and the team’s expertise in technology area to pursue the goal of absolute return.
Based on the macro view, the manager will trim and add long or short positions to extract alpha from the market. Key strategies include sub-sector rotation and thematic investments.
Three-fold investment strategy
Multi-year themes:
Identify growth themes or structural themes
Catalysts-driven:
Navigating themes with well-timed, non-consensus trades
Company turning points:
Assess technology competitiveness and design wins that ultimately drive earnings rebound
Industry Reports:
GfK, IDC, MIIT, Gartner, IHS, Trendforce, AVC, WSTS, Witsview, Display Search, Strategic Analytic, App Annie, etc.
Dynamics / Mix Change:
Segment mix, geographic, product mix, customer mix, design wins, competition mix, consolidation / fragmentation, valuation change, classification change, shareholder / director mix
Locus / Consensus Change
Long-only funds, hedge funds, QDII, Private Equity
Analyst upgrade / downgrade, short / medium / long term, tech-specialist / generalist
Heavy weights:
Stocks with heavy weights should be hedged with other stock(s)
The investment process above is subject to changes.
Clients or prospects can reach us anytime for the latest version of the strategy.
