Review of CIO calls in 2019


The investment portfolio that tracks the DBS CIO Barbell Strategy has appreciated 7.1% since its launch on 28 August 2019.
Chief Investment Office13 Jan 2020
Photo credit: AFP Photo


Pro-risk asset allocation calls in 2019 paid off. In January 2019, extreme caution was rife as financial assets had just undergone a sharp selloff in the prior months. The headwinds facing investors back then included: (a) Rising concerns on corporate earnings, (b) Deteriorating macro momentum, and (c) Monetary policy tightening.  Lingering trade war uncertainties added to the proverbial wall of worries.

Despite the headwinds, we stood our ground. In our 1Q19 CIO Insights: Tug of War, we maintained that:

1)    This was not the start of a bear market.

2)    It would be a ‘tug-of-war’ between bulls and bears, and we had yet to see the peak in the US S&P Index.

3)    Share buybacks would underpin US equities.

Our non-consensus calls have since paid off:

  • For the entire 2019, we maintained a preference for global equities over global bonds. And indeed, global equities rallied 26.6% during the year, outperforming global bonds by 19.8% pts.

  • We also maintained an Overweight call on Alternatives, which comprise gold and hedge funds. Gold surged 18.3% last year while hedge funds were up 8.6%, outperforming global bonds by 11.5% pts and 1.8% pts, respectively.

Figure 1: Cross-assets performance in 2019

Source: Bloomberg, DBS

Global Equity Allocation – US continues to outperform in Developed Markets. We have maintained a clear preference for US equities in Developed Markets since 2018 given:

1)   Stable US economic expansion and benign inflation;

2)   Strong bottom-up earnings growth momentum;

3)   New technology driving cyclical leadership.

This strategy panned out well in 2018 and history repeated itself in 2019. US equities were up 30.9% during the year, outperforming Europe and Japan by 12.6% pts and 11.3% pts, respectively.

That said, our Overweight call in Asia ex-Japan did not turn out as planned – the region garnered moderate returns of 18.2%.

Global Thematics – Seeking opportunities in a bifurcated world. We released a total of ten investment themes in 2019 and their subsequent year-to-date (YTD) returns have been positive. Listed below is the breakdown of their performances:

  • 1Q19 – Average returns of 40.6%: At the start of 2019, we launched three investment themes and their YTD performance since initiation are:

    1)   Global Health Care (+22.7%)

    2)   Digitalisation (+46.9%)

    3)   Athleisure (+52.1%)

  • 2Q19 – Average returns of 6.5%: In the second quarter, we issued another three investment themes and their YTD performance since initiation are:

    1)   China A-Shares (-2.6%)

    2)   Gastronomy (+9.8%)

    3)   Singapore REITs (+12.4%)

  • 3Q19 – Average returns of 5.7%: In the third quarter, we launched two themes and their YTD performance since initiation are:

    1)   Cloud Computing (+4.8%)

    2)   Automation (+6.6%)

  • 4Q19 – Average returns of 7.0%: In the final quarter of 2019, we issued two income-related themes and their YTD performance since initiation are:

    1)   Bond Proxies (+8.4%)

    2)   Europe AT1s (+5.7%)  

Figure 2: In equities, the US continues to outperform in Developed Markets

Source: Bloomberg, DBS

Figure 3: Our Athleisure and Digitalisation themes have performed well since initiation in 1Q19

Source: Bloomberg, DBS

DBS CIO Barbell Strategy – navigating a changing world. To put our investment themes to action, a portfolio that tracks the DBS CIO Barbell Strategy was launched on 28 August 2019.

The Barbell Strategy entails allocating assets to the highest conviction calls from a factor-based and thematic perspective. The portfolio adopts an unconstrained strategy and is benchmark agnostic.

Since its launch, the portfolio has appreciated 7.1% to end-2019.

Figure 4: DBS CIO Barbell Strategy Index – Performance update

Source: Bloomberg, DBS

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