UOB Asset Management’s (UOBAM) United E-Commerce Fund was one of the top three performances in 2023 for the Best Funds Awards 2024 by The Edge Singapore based on Morningstar’s data compilation in the less than US$1 billion ($1.36 billion) category.
While the factsheet says the fund seeks to provide long-term capital growth by investing primarily in common stocks or securities convertible into common stocks of equities traded in Recognised stock exchanges worldwide, the main focus is on developed markets.
A quick look at its geography and holdings explains why this fund did well. The winning formula is staying with a strong economy, a strong market and a geography where technology is way ahead of other markets. Unsurprisingly, more than 87% of the fund’s assets are in IT and geographically in the US. Microsoft and Nvidia are among the largest holdings in the fund and helped it outperform.
“Our call for Nvidia contributed most to the annual return, driven by the growing interest in artificial intelligence’s business potential,” says Wong Ann Derk, senior director of macro strategy and multi-asset at UOBAM.
“To scour the global universe of thousands of stocks and zoom in on our favoured companies, we systematically score companies within our investment universe based on quality and earnings. Specifically, we emphasise companies with positive earnings outlooks, as evidenced by upward earnings revisions. In arriving at the final portfolio, an optimiser is applied to select stocks ranked and scored highly on an expected risk-adjusted return basis.”
The fund also holds stocks like Apple, Adobe and Qualcomm. Wong explains that the portfolio undergoes regular rebalancing, adjusting based on score changes to seize emerging opportunities and exit declining ones.
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“We are aware of the fast-moving nature of the technology-related space that we operate in. In between rebalancing dates, we apply an internal model, which combines price movement with news flow information, to alert for stock-specific risks and necessary actions,” he says.
He points out that the fund’s investment methodology has effectively identified winners based on strong upward earnings revision, which is why it picked Nvidia.
In 2023, the fund remained fully invested, maintaining a low cash level between 0.10% and 1.22%, mostly below 1% throughout the year. The fund’s managers have a risk indicator that would cause them to raise cash. “We leverage the expertise of our multi-asset team that monitors macro development globally and across asset classes for an informed view of market direction. When triggered, we also have a market risk indicator that would lead us to de-risk the portfolio and raise cash significantly,” says Wong.
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Last year, the house view on market directions was constructive. “Our market risk indicator was not triggered. These have supported the fund being fully invested to capture the strong market returns,” he adds.
