Investment Philosophy

Our actively-managed Singapore equity strategy was incepted in 1987 and is an award-winning¹ strategy that seeks to maximise medium to long term capital appreciation by investing primarily in equities listed on the Singapore Exchange Securities Trading Limited (SGX-ST). The strategy targets to generate returns by employing our rigorous investment process that is based on a distinctive investment philosophy at its core, a time-tested Research and ESG (Environmental, Social, and Governance) analysis framework as well as a strong working relationship within the Asian Equity team. The diversity of backgrounds and perspectives have led to dynamism in idea generation and team debate that culminate in the construction of a concentrated portfolio of 30 to 40 investment ideas for our investors.

Another differentiated feature of our investment process lies in the Detailed Fundamental Research where two key components of Change and Sustainable Returns form the basis of the research analysis. The subfactors within these two research pillars are tailored to Asian markets whereby market and company developments can often drive substantial and rapid changes in the companies we invest in. This disciplined research approach is consistently applied to companies to ascertain their relative attractions within a single market and/or across the Asia region.

For more details on our investment philosophy, Research and ESG framework and investment team, please visit the Asia ex Japan Equity Strategy page.

Leveraging on quality growth companies in Singapore

'New Singapore' stocks, which represent the future economy of Singapore, embody innovation, integration and sustainability. These are companies that are reinventing or reorganising their business models to succeed and be more relevant in the future economic landscape. This brings opportunities, particularly where the companies explore inorganic growth activities. 'New Singapore' companies may be in sectors such as technology, data centres, healthcare, logistics, tourism and consumer services, most of which focus on the service eco-system².

Benefiting from Singapore’s strong corporate governance culture

The country's robust financial regulations, a business-friendly environment and sound political stability provide a high degree of predictability for businesses operating here and anchor investor confidence over the long run. According to the Economist Intelligence Unit (as of 10 April 2020), Singapore is the best country in the world for business from 2020 to 2024. Singapore is also the only Asian country that has the highest AAA credit rating awarded by all 3 major credit rating agencies (based on Fitch, Moody's and S&P Rating, 31 March 2022)³.

Firms listed on the local stock exchange are subject to stringent reporting and auditing standards. Listed firms are subject to continuous disclosure requirements on material developments and key areas of concern, in addition to publishing a sustainability report yearly from the financial year commencing 2022.

People, Process, Portfolio

The investment team for the Singapore equity strategy has deep research experience and has worked together with a well-honed investment process that is time-tested over different market cycles. The two co-lead managers have a combined experience of over 45 years, complementary styles and understand the nuances of investing in the local market.

Fundamental research is at the core of its belief where ESG analysis is integrated into the investment process. There is active debate in team meetings that challenges market consensus and generates stock ideas that are not easily identifiable through general screening techniques.

The team is focused on constructing concentrated portfolios to best express the strongest convictions in the portfolio. Emphasis is on active share and deviation from the benchmark to best add value for investors. Portfolios are built bottom up, and normally contain 30 to 40 holdings.

¹ See list of Awards for both Singapore Dividend Equity Fund and the Nikko AM Shenton Thrift Fund, which are amongst the representative funds of the strategy. Past performance is not necessarily indicative of future performance.
² References to particular sectors are for illustrative purposes only and are not recommendations.
³ Source: Bloomberg, 31 March 2022

Our Singapore Dividend Equity

Alternatively, investors can also choose our Singapore Dividend equity strategy, which has a dividend bias. Equities offering sustainable dividend payments with long term capital appreciation potential will be emphasized, which are broadly categorised as Dividend Anchors and Dividend Growers.

The Dividend Advantage

Dividend expectations for Singapore corporates continue to remain more resilient than earnings estimates, which is a testament to the quality of underlying earnings, cash flows and balance sheets. Since 2010, reinvested dividends had offered additional alpha and enhanced the returns for the STI by more than 50% as shown below on a cumulative basis (annualised returns of the STI since 2010 to March 2022 is more than 4% p.a.).

In a low interest-rate environment, where decent yields are hard to come by, stocks that pay an attractive and predictable dividend yield will continue to be in strong demand with yield-hungry investors.

Reinvested Dividends Enhanced STI Returns Since 2010

Source: Bloomberg, March 2022. Returns are shown on a cumulative basis. Annualised returns of the STI since 2010 to March 2022 is more than 4% p.a.
Any forecast or past performance is not necessarily indicative of future performance.