Syfe’s H1 2023 Performance: A Deep Dive 

The initial months of 2023 brought concerns of a banking crisis, recession fears, and unprecedentedly high rates. However, the markets continued to showcase their unpredictability. Against all anticipations, equities witnessed a significant increase during this period, with major tech stocks marking a notable comeback. On the other hand, global bond markets registered muted returns.

With this backdrop of global market trends, let’s delve into an in-depth review and analysis of our portfolios’ performance for H1 2023.

  • Core Portfolios: All Portfolios in the Green
  • Thematic Portfolios: Disruptive Technology Leads with over 37% YTD
  • Cash+: Solidly outperformed the tracking Fed Fund Rate.

Core Portfolios: All Portfolios in the Green (to update)

Source: Syfe, Bloomberg. As of 31 July 2023, in HKD. Syfe model portfolio performance net of fund level fees and may include point-in-time backtested historical data. Benchmarks: Equity100 (MSCI World), Core Growth (S&P Target Risk Growth), Core Balanced (S&P Target Risk Moderate), Core Defensive (S&P Target Risk Conservative).

Performance Spotlight Our core portfolios – Core Equity100, Core Growth, Core Balanced, and Core Defensive – have notched up impressive year-to-date returns of +18.2%, +14.1%, +8.9%, and +5.9%, respectively. On a relative basis, there was slight underperformance compared to benchmarks for Core Equity100 and Core Defensive during the year’s first seven months, primarily due to a conscious defensive allocation in our portfolios. When we step back to take in the panorama of a five-year horizon, it is clear that all our four core portfolios have either matched or outshone their respective benchmarks. 

The Bright Spots As the tech sector emerged back as the key return driver in the equity markets this year, our allocation to the growth factor via QQQ (Invesco QQQ Trust Series 1) has been the primary contributor to performance, especially for Core Equity 100 portfolio. This was followed by our allocation to broad US equity markets, specifically RSP (Invesco S&P 500 Equal Weight ETF) and CSPX (iShares Core S&P 500 UCITS ETF). Additionally, our allocation to GLD (SPDR Gold Trust) has also played a part in enhancing the performance.

The Laggards With the Federal Reserve hiking up the rates throughout the first half, defensive sectors – including XLU (Utilities Select Sector SPDR Fund), and XLV (Health Care Select Sector SPDR Fund), as well as specific yield instruments, found themselves lagging behind, delivering somewhat subdued returns year-to-date.

Looking ahead Following our systematic optimization process, the core portfolios are geared towards more defensive sectors like consumer staples over cyclical ones like financials. This process also emphasises emerging market factors, leading to an increased exposure to Chinese equities that stands to capitalise on the country’s recent positive economic policy shifts. Our refined portfolio construction, therefore, reflects a strategic shift towards defensive sectors and higher allocations tied to emerging market opportunities.

Thematic Portfolios: Disruptive Technology Leads with over 37% YTD

Source: Syfe, Bloomberg. As of 31 July 2023, in HKD. Syfe model portfolio performance net of fund level fees and may include point-in-time backtested historical data.

Disruptive Technology As of 31 July 2023, our Disruptive Technology model portfolio has experienced a remarkable year-to-date surge of +37.4%. The recent debut of ChatGPT has reignited excitement for Artificial Intelligence. Breakthroughs in quantum computing, accelerating advancements in AI demonstrated by products such as ChatGPT, and the burgeoning applications of blockchain and cryptocurrencies, epitomise the transformative potential of disruptive technology. Despite the compelling long-term prospects, investors should exercise caution given the current elevated valuations.

ESG & Clean Energy Our ESG & Clean Energy model portfolio has made considerable gains, increasing by 9.4% in the first seven months of the year. The seismic shift towards green energy remains central to our strategy. What is interesting to notice is that regulatory scrutiny, once a predominantly European issue, has rapidly ascended the agenda in the U.S. and APAC markets. Adding ESG & Clean Energy themes into your investment portfolio  is not just about reaping the rewards of increased government and corporate spending. It also plays a crucial role in mitigating potential regulatory risks.

Healthcare Innovation Our Healthcare Innovation model portfolio has notched a return of 4.7% year-to-date as of the end of July 2023.  The healthcare sector has lagged the broader market this year — mostly because tech stocks have been stealing the show. However, the healthcare arena continues to present a compelling investment opportunity, driven by innovations in science and technology, ageing populations, and strong global market demand.

China Growth Our China Growth model portfolio gained 2.8% year to date. Following initial enthusiasm in Q1 due to the reopening, the market was subsequently let down by lukewarm economic figures. However, a remarkable shift in the government’s approach in July, with promises of robust support for the economy, sparked a resurgence in market optimism, propelling a 10% increase. As we move forward, Chinese equities remain a focal point, though investors should remain mindful of their inherent volatility.

Cash+: Solidly outperformed the tracking Fed Fund Rate. 

Source: Syfe, Bloomberg. As of 31 July 2023, in HKD. Cash+ performance reported net of Syfe management fees. 

Cash+ has continuously delivered consistent returns through the first half of this year, the yield for Cash+ has been consistently revised upwards as fed fund rates increased. Cash+ is built for investors looking to earn higher returns on their idle cash while preserving their capital and is suitable for their immediate and near-term cash needs.

As of the end of July, the yield for Cash+ is 5.53% p.a.*, which is one of the highest among similar cash management solutions in the market. Syfe Cash+ has been able to perform better than the Federal Funds Target Range – Upper Limit for the majority of the periods since launch. 

Our Thoughts For Second Half 2023 

As we set our sights on the latter half of 2023, an air of optimism permeates our perspective on the global economy. We see a possible ‘soft landing’ scenario on the horizon, buoyed by resilient economic activity and softening inflation. The recent rate hike by the Fed in July, in our assessment, could potentially mark the end of the current rate hiking cycle, with any further cuts likely postponed until 2024. Against this backdrop, investment opportunities across various asset classes emerge, providing investors with compelling prospects for growth and income diversification. 

*Net of fund-level fee and trailer fee rebate (if any). The yield presented here is estimated based on the weighted average of the Yield to Maturity of assets within Cash+ discretionary service. The latest yield, provided by asset managers, is as of 30 Jun, 2023, and is subject to change based on market conditions such as interest rate changes. Yield is not a guarantee of future performance. A positive yield does not imply a positive return. Investments involve risks and Cash+ does not provide any guarantee or assurance of returns. Learn more