Unlike most multi-asset strategies where the fund managers are based in either the US or Europe, Pictet Asset Management’s Andy Wong runs his global multi-asset strategy out of Hong Kong – which he says has its advantages.
He drew attention to two investment themes in particular, which are growing in importance: artificial intelligence (AI) and shifting supply chains due to geopolitics.
Being based in Hong Kong allows Wong (pictured) to get a differentiated view on these two themes, he said. After all, the computing power and chips required for AI are manufactured nearby in Taiwan and Korea, and countries such as India and Vietnam are at the centre of shifting supply chains out of China.
Wong did admit that being close to Silicon Valley, where all the US technology innovation leaders are, would be just as beneficial.
But he argued that being closer to the Asian semiconductor supply chains has proven to be fruitful in forming a strong view on certain US tech leaders such as Nvidia, for example.
“Semiconductors are the foundation of the modern economy,” he told FSA in an interview. “If you want to understand Nvidia, your supply chain in Asia will tell you more than your US channel check.”
He said having the local Asian supply chain knowledge helps provide a deeper understanding of why Nvidia has a more assured supply chain than its competitors, for instance.
Another example is Apple: “When people research Apple production to find out what they actually do, they go to the Asian supply chain.”
In terms of how this has translated into strategy positioning, aside from an overweight towards US technology leaders, Wong said his strategy probably has more Taiwan and Korean equity exposure than a typical global multi-asset strategy.
This has helped the Pictet Strategic Income fund, which Wong manages, outperform more recently. It has returned 27.4% over the past two years, double the gains of the peer group average in Hong Kong.
Looking ahead, Wong likens the current race to develop artificial intelligence to a land rush.
“Companies that start building AI ecosystems are likely winners.”
Therefore, he favours select US large cap technology leaders because they all have the tools necessary to win in this new ‘AI land grab’.
“Who is going to win going forward? We think you need four things: tech leadership, computing power, data, and industry verticals,” he explained.
Elsewhere in the portfolio, the fund is taking less risk on the fixed income side where Wong prefers US treasuries. Looking at the strategy’s top-10, US treasuries feature prominently.
Since he is not expecting a 1970s style stagflation situation, Wong thinks US treasuries have attractive real yields.
“In 2020 and 2021 when real yields were negative 1%, everybody wanted to buy bonds,” he said. “Today your real yield is 2.2% to 2.5%, but few want to buy bonds.”
“People argue because of the lack of fiscal discipline it’s just become an untenable asset class that is only going to grow. I don’t disagree with that, but is there a real alternative?”
When it comes to Fed policy, Wong prefers not to focus too much on timing a rate cut, but more on the trend.
“We don’t think how many cuts matters,” he said. Ultimately one important takeaway is that “the Fed is no longer your enemy,” he said. “Its back to managing the business cycle.”
