United G Strategic Fund

Transcription

1 United G Strategic Fund Semi Annual Report for the financial period 1 st July to 31 st December 2016

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3 MANAGER UOB Asset Management Ltd Registered Address: 80 Raffles Place UOB Plaza Singapore Company Registration No. : Z OPERATIONS ADDRESS 80 Raffles Place #06-00, UOB Plaza 2 Singapore Tel: DIRECTORS OF UOB ASSET MANAGEMENT Lee Wai Fai Cheo Chai Hong Goh Yu Min Thio Boon Kiat TRUSTEE / REGISTRAR / ADMINISTRATOR HSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay #13-02, HSBC Building Singapore CUSTODIAN The Hongkong and Shanghai Banking Corporation Limited 1 Queen s Road Central Hong Kong AUDITORS PricewaterhouseCoopers LLP 8 Cross Street #17-00, PWC Building Singapore SOLICITORS TO THE MANAGER Tan Peng Chin LLC 30 Raffles Place #11-00, Chevron House Singapore SOLICITORS TO THE TRUSTEE Shook Lin & Bok LLP 1 Robinson Road #18-00, AIA Tower Singapore INVESTMENT ADVISER GYC Financial Advisory Pte Ltd 350 Orchard Road #20-01, Shaw House Singapore

4 A) Fund Performance Fund Performance/ Benchmark Returns 3 mth % Growth 6 mth % Growth 1 yr % Growth 3 yr Ann Comp Ret 5 yr Ann Comp Ret 10 yr Ann Comp Ret Since Inception 29 July 2010 Ann Comp Ret United G Strategic Fund Benchmark Source: Lipper, a Thomson Reuters Company. Note: The performance returns of the Fund are in Singapore Dollar based on a NAV-to-NAV basis, with dividends and distributions reinvested, if any. The benchmark of the Fund: 80% MSCI AC World Index and 20% Citigroup Government Bond Index. For the six-month period ended 31 December 2016, the United G Strategic Fund achieved a return of 11.4%, compared with a blended benchmark 1 gain of 11.1% comprising MSCI AC World Index and Citigroup Government Bond Index. For comparison, the MSCI AC World Index advanced by 14.5%, while the Citigroup Government Bond Index declined by 2.5% in Singapore dollar terms. The Fund s primary objective is to invest in global markets and participate in returns during periods of low or moderate risk. However, when risks levels rise, the Fund will tactically reduce risk asset exposures and accept lower potential return in order to protect against downside risks. During the second half of 2016, the key risk indicators of volatility, correlations, and financial stress primarily signaled an outlook of moderate to low fundamental risk and financial stress. However due to risks and uncertainties regarding Brexit, we were initially cautious at the start of the period. At end June 2016, the Fund had raised cash levels to 30% and cut equity levels to 70% in order to mitigate potential risks from Brexit. After economic data showed no signs of deterioration following Brexit, allocation was brought back up to 98% at the end of the year. Geographically, the Fund was predominantly focused on developed market equities for most of the period. Equity investments in the US, Europe and Japan made up 77% of the Fund s investments at the end of the year. Investments in the emerging markets made up 21% of the Fund s investments. The global geographic exposure throughout the period was broadly in line with the MSCI World benchmark. 1 The Fund s benchmark comprises 80% MSCI AC World Index and 20% Citigroup Government Bond Index. 2

5 Asset Allocation, as of 31 Dec 2016 Equities 98% US 48% Europe 21% Asia Ex Japan 13% Japan 8% EM 8% Fixed Income 0% US 0% Asia 0% Commodities 0% Gold 0% Broad commodities 0% Cash 2% Total 100% Economic and Market Review In the second half of 2016, investors had barely recovered from the Brexit surprise before they were rocked again by another political shock, this time in the form of Donald Trump s victory in the US presidential election. Investors were initially concerned that a wild card such as Trump would introduce elements of uncertainty to markets and lead to a risk asset sell-off. Instead, his more reconciliatory tone post-election caused markets to focus on expected policy shifts when he takes over office. This led to a sharp rally in the equity market and spike in bond yields, as investors expected fiscal stimulus both in the forms of tax cuts and higher government spending to result in faster growth and inflation, as well as higher government debt level. With rising bond yields, and expectations of accelerated rate hikes from the US Federal Reserve (Fed) on the back of higher growth and inflation, the US Dollar surged, climbing more than 5% after the US Presidential election results. Global equity markets initially followed US market higher. However, after the initial euphoria, Asia started to drift lower as investors began to focus on the more belligerent aspect of Trump s policy proposals, including more protectionist trade policies and imposing punitive tariffs on China imports. The uncertainty on prospects for trade in the region led investors to shift capital away from Asia to other developed markets such as Europe and Japan. Together with risk aversion in China as a result of a bond market turmoil, Asia underperformed the rest of the world in the last two months of On the fixed income front, the US Treasury market saw a spike in volatility as investors grappled with the political shocks and uncertainties. The US 10-year Treasury yield, which fell to as low as 1.36% after Brexit, almost doubled to hit 2.6% by the end of the year amid higher growth and inflation expectation. This helped drag global interest rates higher. The 10-year German Bund yield, which turned negative in the middle of 2016, rose to as high as 40 basis points. In addition, the 10-year Japanese government bond yield, which was negative for most of 2016, turned positive by end of the year. This led to losses in longer duration bond holdings as seen in the negative returns for the bond indices in the second half of 2016, paring most of the gains for the asset class in the first half. The Singapore government bond yield moved largely in tandem with the US, with the 10-year falling below 1.7% at the beginning of period, only to close the year above 2.5%. This pattern is to be expected given that Singapore s interest rate has historically been highly correlated with the US. 3

6 Outlook and Fund Strategy We expect 2017 to be more reflationary with better growth and normalising levels of inflation and interest rates. Our view is that this trend will help the world break out of its flirtation with secular stagnation and thus implies an environment where equities should perform better than fixed income. Better nominal growth should boost earnings for corporates and could help stimulate animal spirits that support investment and further growth. At the same time, reflation implies the Fed will have to continue with its rate hike plans (we expect 3 more in 2017). We expect this rate hike path will be gradual enough that fixed income markets will be able to continue to provide positive returns, and concurrently create enough of a headwind that expected returns should fall to low single digit levels over the coming year. Furthermore, we expect the reflationary trend and interest rate hikes to be supportive of the US Dollar as we anticipate it to appreciate between the 3% to 5% range. Historically, during periods of Dollar strength, developed market equities outperform emerging market equities. And while commodities would usually do well during periods of higher inflation, they also tend to underperform during periods of rising Dollar. We think the risks to look out for in 2017 would include US policy makers failing to deliver on fiscal support promised. Additionally, it will take time for fiscal support to be rolled out either in terms of infrastructure spending or tax cuts. If the economy starts to slow and wage increases do not materialise, the market would easily return to the weaker trends from early in 2016 where yields remained low and fixed income performed better than equities. Additionally, there are several Trump policies that are more negative on growth including protectionism and immigration reduction that could start to weigh on growth by European politics could be another source of risk as both Brexit and the Italian referendum imply growth risks in the Europe. The China economy has been tracking well as of the end of 2016, but we expect property construction to begin slowing in 2017 and when China s economy starts hitting the brakes, global markets would likely turn volatile on fears of a potential hard landing. There are not many historical periods where major economies have shifted from low inflation and secular stagnation to a reflationary environment. Our asset class investment models indicate that this regime shift should be supportive of growth and assets such as equities. It is fair to note that in this environment, we are forced to make theoretical assumptions rather than decisions that are based on historical precedents. Thus the start of 2017 appears promising for growth but will require careful monitoring for objective evidence for these growth theories to be confirmed. Our base strategy remains that we will be overweight on equities during periods of economic expansion with controlled levels of inflation. Economic leading indicators are tracked on a daily basis to monitor the risks of a new economic downturn. If economic indicators point to the end of an economic cycle then the portfolio strategy would be to significantly cut risk exposures to asset classes like equities. At the same time we monitor risk indicators such as financial stress, volatility and correlations. When our risk indicators are pointing to higher risk regimes, we will then reduce the level of risk assets accordingly. In the event of a financial crisis then the Fund s strategy could target a 0% weight to equities which tend to be more volatile. 4

7 B) Investments at fair value and as a percentage of NAV as at 31 December 2016 under review classified by i) Country Please refer to the Statement of Portfolio from pages 12 to 13 ii) Industry iii) Asset Class Please refer to the Statement of Portfolio from pages 12 to 13 iv) Credit rating of debt securities C) Top Ten Holdings The top 10 holdings as at 31 December 2016 and 31 December largest holdings at 31 December 2016 Percentage of total net assets attributable to Fair Value unitholders (S$) % SPDR S&P 500 ETF TRUST 2,337, POWERSHARES QQQ 2,290, ISHARES MSCI ACWI ETF 2,245, ISHARES CORE S&P 500 ETF 2,216, ISHARES RUSSELL 2000 ETF 2,207, ISHARES S&P EUROPE 350 INDEX ETF 2,189, ISHARES MSCI JAPAN ETF 2,083, ISHARES MSCI ALL COUNTRY ASIA EX-JP ETF 1,867, VANGUARD FTSE EUROPE ETF 1,773, ISHARES FTSEUROFIRST 80 UCITS ETF 1,318,

8 C) Top Ten Holdings (continued) 10 largest holdings at 31 December 2015 Percentage of total net assets attributable to Fair Value unitholders (S$) % POWERSHARES QQQ 2,359, ISHARES MSCI ACWI ETF 2,291, ISHARES RUSSELL 2000 ETF 2,287, ISHARES MSCI JAPAN ETF 2,253, VANGUARD FTSE EUROPE ETF 2,245, SPDR S&P 500 ETF TRUST 2,174, ISHARES CORE S&P 500 ETF 2,119, ISHARES S&P EUROPE 350 INDEX ETF 1,741, SPDR DJIA TRUST ETF 1,728, ISHARES MSCI ALL COUNTRY ASIA EX-JP ETF 1,404, D) Exposure to derivatives i) fair value of derivative contracts and as a percentage of NAV as at 31 December 2016 ii) net gains/(losses) on derivative contracts realised during the financial period 01 July 2016 to 31 December 2016 iii) net gains/(losses) on outstanding derivative contracts marked to market as at 31 December 2016 E) Amount and percentage of net asset value (NAV) invested in other schemes as at 31 December 2016 Please refer to the Statement of Portfolio from pages 12 to 13 F) Amount and percentage of borrowings to net asset value (NAV) as at 31 December

9 G) Amount of redemptions and subscriptions for the financial period 01 July 2016 to 31 December 2016 Total amount of redemptions SGD 5,421,008 Total amount of subscriptions SGD 900,711 H) The amount and terms of related-party transactions for the financial period 01 July 2016 to 31 December 2016 i) As at 31 December 2016, the Fund maintained current accounts with the United Overseas Bank Limited and The Hongkong and Shanghai Banking Corporation Limited as follows: United Overseas Bank Limited Bank balances SGD 30,063 The Hongkong and Shanghai Banking Corporation Limited Bank balances SGD 547,398 ii) Purchase/holdings of UOBAM unit trusts by UOB or its affiliated companies as at 31 December 2016 iii) Investment in Initial Public Offerings managed by UOB Group iv) As at 31 December 2016, there was no brokerage income earned by UOB Kay Hian Pte Ltd. I) Expense ratios 31 December % 31 December % Note: The expense ratio has been computed based on the guidelines laid down by the Investment Management Association of Singapore ( IMAS ). The calculation of the expense ratio at 31 December 2016 was based on total operating expenses of $575,220 (2015: $549,853) and the weighted average of the Underlying Fund s unaudited expense ratio of 0.33% divided by the average net asset value of $26,392,972 (2015: $26,082,879) for the year. The total operating expenses do not include (where applicable) brokerage and other transactions costs, performance fee, interest expense, distribution paid out to unitholders, foreign exchange gains/losses, front or back end loads arising from the purchase or sale of other funds and tax deducted at source or arising out of income received. The Fund does not pay any performance fee. The average net asset value is based on the daily balances. J) Turnover ratios 31 December % 31 December % Note: The portfolio turnover ratio is calculated in accordance with the formula stated in the Code on Collective Investment Schemes. The calculation of the portfolio turnover ratio was based on the lower of the total value of purchases or sales of the underlying investments, being sales of $1,886,992 (2015: sales of $2,077,362) divided by the average daily net asset value of $26,205,966 (2015: $25,297,257). 7

10 K) Any material information that will adversely impact the valuation of the scheme such as contingent liabilities of open contracts L) For schemes which invest more than 30% of their deposited property in another scheme, the following key information on the second-mentioned scheme ( the underlying scheme ) 1 should be disclosed as well i) top 10 holdings at fair value and as percentage of NAV as at 31 December 2016 and 31 December 2015 ii) expense ratios for the financial period ended 31 December 2016 and 31 December 2015 iii) turnover ratios for the financial period ended 31 December 2016 and 31 December 2015 M) Soft dollar commissions/arrangements UOB Asset Management has entered into soft dollars arrangements with selected brokers from whom products and services are received from third parties. The products and services relate essentially to computer hardware and software to the extent that they are used to support the investment decision making process, research and advisory services, economic and political analyses, portfolio analyses including performance measurements, market analyses, data and quotation services, all of which are believed to be helpful in the overall discharge of UOB Asset Management s duties to clients. As such services generally benefit all of UOB Asset Management s clients in terms of input into the investment decision making process, the soft credits utilised are not allocated on a specific client basis. The Manager confirms that trades were executed on a best execution basis and there was no churning of trades. N) Where the scheme offers pre-determined payouts, an explanation on the calculation of the actual payouts received by participants and any significant deviation from the predetermined payouts 1 where the underlying scheme is managed by a foreign manager which belongs to the same group of companies as, or has a formal arrangement or investment agreement with, the Singapore manager, the above information should be disclosed on the underlying scheme. In other cases, such information on the underlying scheme should be disclosed only if it is readily available to the Singapore manager. 8

11 STATEMENT OF TOTAL RETURN For the half year ended 31 December 2016 (Un-audited) 31 December December 2015 $ $ Income Dividends 241, ,153 Interest 4, , ,153 Less: Expenses Management fee 198, ,378 Trustee fee 5,286 5,103 Audit fee 6,750 6,736 Registrar fee 12,551 12,551 Valuation fee 16,518 15,948 Administration fee 33,036 31,896 Custody fee 1,433 1,596 Transaction costs 13,894 9,531 Other expenses* (6,493) 11, , ,804 Net loss (35,008) (36,651) Net gains or losses on value of investments Net gain/(loss) on investments 2,927,398 (520,509) Net foreign exchange gain 63,444 1,682 2,990,842 (518,827) Total return/(deficit) for the period before income tax 2,955,834 (555,478) Less: Income tax (69,305) (69,400) Total return/(deficit) for the period 2,886,529 (624,878) * Other expenses include the GST rebate 9

12 STATEMENT OF FINANCIAL POSITION As at 31 December 2016 (Un-audited) 31 December June 2016 $ $ ASSETS Portfolio of investments 25,020,479 19,115,121 Receivables 45,011 16,662 Fixed deposits - 6,000,000 Cash and bank balances 577,461 2,197,525 Total Assets 25,642,951 27,329,308 LIABILITIES Payables 133, ,628 Total Liabilities 133, ,628 EQUITY Net assets attributable to unitholders 25,509,912 27,143,680 10

13 STATEMENT OF MOVEMENTS OF UNITHOLDERS FUNDS For the half year ended 31 December 2016 (Un-audited) 31 December 30 June $ $ Net assets attributable to unitholders at the beginning of the financial period/year 27,143,680 25,817,166 Operations Change in net assets attributable to unitholders resulting from operations 2,886,529 (2,353,825) Unitholders' contributions/(withdrawals) Creation of units 900,711 7,865,500 Cancellation of units (5,421,008) (4,185,161) Change in net assets attributable to unitholders resulting from net creation and cancellation of units (4,520,297) 3,680,339 Total (decrease)/increase in net assets attributable to unitholders (1,633,768) 1,326,514 Net assets attributable to unitholders at the end of the financial period/year 25,509,912 27,143,680 11

14 STATEMENT OF PORTFOLIO As at 31 December 2016 (Un-audited) By Geography - Primary Quoted Equities Holdings at 31 December 2016 Fair value at 31 December 2016 Percentage of total net assets attributable to unitholders at 31 December 2016 $ % FRANCE LYXOR ETF MSCI AC ASIA-PACIFIC EX JP 11, , LYXOR MSCI EMERGING MARKETS UCITS ETF 14, , TOTAL FRANCE 975, IRELAND ISHARES FTSEUROFIRST 80 UCITS ETF 79,371 1,318, ISHARES MSCI EMERGING MARKETS UCITS ETF DIST 5, , TOTAL IRELAND 1,597, UNITED STATES ISHARES MSCI ACWI ETF 26,271 2,245, ISHARES MSCI EMERGING MARKETS ETF 24,149 1,221, ISHARES MSCI PACIFIC EX JAPAN ETF 10, , ISHARES RUSSELL 2000 ETF 11,331 2,207, ISHARES S&P EUROPE 350 INDEX ETF 39,055 2,189, ISHARES CORE S&P 500 ETF 6,818 2,216, ISHARES MSCI ALL COUNTRY ASIA EX-JP ETF 23,533 1,867, ISHARES MSCI JAPAN ETF 29,517 2,083, POWERSHARES QQQ 13,382 2,290, SPDR DJIA TRUST ETF 3, , SPDR S&P 500 ETF TRUST 7,238 2,337, VANGUARD FTSE EMERGING MARKETS ETF 8, , VANGUARD FTSE EUROPE ETF 25,602 1,773, TOTAL UNITED STATES 22,447, Portfolio of investments 25,020, Other net assets 489, Net assets attributable to unitholders 25,509,

15 STATEMENT OF PORTFOLIO As at 31 December 2016 (Un-audited) By Geography - Primary (Summary) Quoted Equities Percentage of total net assets attributable to unitholders at 31 December 2016 Percentage of total net assets attributable to unitholders at 30 June 2016 % % France Ireland United States Portfolio of investments Other net assets Net assets attributable to unitholders As the Fund is invested wholly into exchange traded funds ( ETFs ), it is not meaningful to classify the investments into industry segment. 13

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