Geopolitical risk has reared its ugly head, with mounting uncertainty over the nuclear brinkmanship with North Korea. No surprise then to see a flight to safe haven assets such as gold by investors.

In line with that, the expert panel tracking the three simulated portfolios in the Save & Invest Portfolio Series has decided to lock in some profits, reduce exposure to risks, and raise cash levels to 20 per cent in all portfolios.

The series features communications manager Shona Chee, 26; entrepreneur Getty Goh, 39, who is married with two children; and retiree Wang Moo Kee, 63. The Portfolio Series, introduced by The Sunday Times in January last year, does not involve actual money as it is intended for the purposes of illustration and education only. The portfolios are constructed by the CFA Society Singapore (CFAS) for an ideal investment horizon of five to 10 years.


With tensions over North Korea escalating, equities across the world have corrected, the CFAS panel noted. So far this year, the best-performing assets (in US dollar terms) have been Turkish equities (up 48 per cent), China (up 41 per cent), Greece (up 32 per cent), the Mexican peso (up 17 per cent), the Swedish krona (up 14 per cent) and copper (up 22 per cent).

The panel said that in terms of asset classes, emerging market equities are up 28 per cent this year, European equities are up 19 per cent and industrial metals up 21 per cent. The two main assets that have tumbled are oil (down 14 per cent) and the United States dollar index (down 9 per cent). Meanwhile, the Singdollar is up nearly 6.5 per cent against the US dollar and the Straits Times Index is up nearly 25 per cent for the year or 13.8 per cent in local currency terms.

“Against such a global backdrop, it is evident that the long-term preservation of purchasing power can only be safeguarded by investing in a globally diversified portfolio and reducing exposure in the face of obvious risks,” said the panel.


For the month ended Aug 31, Ms Chee’s portfolio was up 1.01 per cent, beating the benchmark by one percentage point. Mr Goh’s portfolio was up 1.02 per cent against the benchmark – edging up just 0.03 per cent. Mr Wang’s portfolio was up 0.50 per cent, beating the benchmark by 0.48 percentage point.

The relative outperformance of all three portfolios was driven by the performance of Singapore stocks, such as Venture Corp (up 22.9 per cent), and global exchange-traded fund (ETF) selections.

The gold (up 3.2 per cent) and Asia ex-Japan (up 1.9 per cent) ETFs helped drive the outperformance for the global ETF selection for all three portfolios, while Mr Goh’s portfolio enjoyed an additional boost from the China ETF (up 5.1 per cent).

A correction in A-Reit (down 1.8 per cent) led to the underperformance of the real estate investment trust selection against the small gain in the broader S-Reit index. The bond selection in Ms Chee’s and Mr Goh’s portfolios outperformed mainly because of the gain in the iShares JPM Asia Bond ETF (up 1.3 per cent). A correction in the OCBC Perp (down 3.1 per cent) and a slip in the ABF Singapore Bond Index Fund (-0.1 per cent) caused Mr. Wang’s bond selection to underperform.


The panel decided to raise cash levels to about 20 per cent in all portfolios. To lock in profits, it sold the following from all three portfolios – DBS Group Holdings (as the higher non-performing loans are a concern), Venture (cashing out following the strong rally) and the MSCI USA ETF (high valuations and potential geopolitical risks).

The OCBC position was trimmed in half in both Mr Goh and Mr Wang’s portfolios, but sold completely in Ms Chee’s portfolio, as it would not have been efficient to halve her position due to cost considerations. To reach the 20 per cent cash target, the Asia ex-Japan ETF was halved in Mr Goh’s portfolio, while for Mr Wang, the India ETF was completely sold and the Europe ETF cut by half.

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