Andy Wong, Pictet Asset Management
The difficult but the right thing to do this year is to hold on to “secular growth” and “quality reopening” themes, Andy Wong, senior investment manager of international multi-asset team at Pictet AM said in a report.
Secular usually points to specific stocks or stock sectors which are unaffected by short-term trends.
“We added to secular growth themes and quality reopening plays in the US, Japan, and Taiwan markets,” Wong said.
From a sector perspective, Pictet AM favours themes such as and tech companies with strong balance sheets, enhancing leadership positions and profitability. Wong likes the structurally growing semiconductor segment, given that semiconductors are core to modern technology, as well as segments catering for millennials’ increasing spending, he explained.
“As we are in the middle of profound tech/innovation changes, we are positive about long-term trends such as digitalisation, 5G, cloud computing and e-mobility. We are also positive about the clean energy sector,” according to Wong.
The confluence of risk factors that plagued risk assets in September saw some resolutions in October. “Technicals improved and seasonality is strong into year-end.”
With positive messaging from authorities, Chinese stocks became more attractive, said Wong. Pictet AM started adding to Chinese tech in early August, as the risk-reward balance improved, and the firm has further increased its exposure.
Wong manages the HK$2.38bn ($306m) Pictet Strategic Income Fund, which has posted 39.08% three-year cumulative return in US dollars, compared with a 27.39% return by its sector average, according to FE fundinfo. The fund does not have a specific benchmark index.
The fund seeks to provide income and achieve long-term capital growth over the medium- to long-term while also managing downside risk by investing primarily in a global diversified portfolio of equities and fixed income securities.
As at 30 September 2021, the fund’s top five asset allocations are: 34.8% North American equities, 19.6% Asia Pacific equities, 10.7% developed market government bonds, 8.6% cash and 5.9% real estate. Its top holdings include Amazon, Tencent, Meituan and Alphabet.
Wong pointed out that US household balance sheets are the strongest in decades, which has led to robust retail sales in US as well as US banks’ strong earnings.
“We also note that inflation worries have lessened, which is reflected in sectors such as railroad, lumber and freight. Chip shortages for automakers started to ease,” he said.
Companies that benefit from increasing capex, help improve productivity, and can benefit from the goods-to-services pass-off provide investment opportunities and should outperform.
“Dominant secular growth is still underestimated for its stability, cash flow generation, buybacks, and growth,” Wong stressed.
Pictet Strategic Income Fund vs sector average