United G
Strategic Fund

We came together with UOB Asset Management in 2010 to collaborate on the United G Strategic Fund — an all-weather fund that seeks to minimise risks during the difficult stages of an economic cycle, and maximise potential returns in growth and recovery periods.

In the long term, being able to minimise losses in adverse market conditions gives the Fund a good probability of outperforming the market, making it especially suited for investors in today’s volatile and uncertain climate.

 

Investing in a wide base of stocks (through index funds) around the world in accordance with a quantitative risk model, the Fund is able to rapidly reduce the proportion of risky assets in times of exceptional market stress (as signalled by the risk model), limiting severe losses to the portfolio. The United G Strategic Fund has a Morningstar rating of 5-stars (as of Aug 2022).

 
 
 

YTD Returns

as of 30 Jun 2023

+12.57%

5-Year Gross Returns

as of 30 Jun 2023

+30.01

10-Year Gross Returns

as of 30 Jun 2023

+80.00%

Annualised Return

as of 30 Jun 2023 (10-year)

+6.05%

Up to 60% of the Fund may be invested in sub-funds of Dimensional Funds plc. The balance will be invested in Exchange-Traded Funds (ETFs) listed on global stock exchanges. Dimensional Fund Advisors (DFA) is a strong proponent of Evidence-Based Investing, which invests according to proven sources of expected return.

In Nov 2020, the investment strategy of the Fund was updated. The Fund now has a tilt to Environmental, Social and Governance (ESG) factors through the DFA Global Sustainability Core Equity sub-fund. ESG strategies allow investors to implement socially responsible investing principles and allocate capital to companies which focus on society and the world at large - instead of just profits. We are the first in Singapore to give investors access to DFA’s sustainable strategies.

In addition, the fund also has an allocation to ETFs managed by Avantis Investors. Like DFA, Avantis is also a strong proponent of financial science and builds its investment strategies on principles of Evidence-Based Investing to ensure investors achieve the highest and most consistent return over the long-term.

 

 Fund Facts

 
 

What is United G Strategic Fund about?

The United G Strategic Fund offers you the opportunity to invest in a portfolio primarily comprising of index funds across the major global exchanges.

This Fund addresses the trend of increasingly shorter investment cycles and higher volatility in markets with a flexible asset allocation strategy determined by a quantitative risk model that measures various financial stress regimes, and enables the fund manager to adapt to both bull and bear markets.

 
 

Value Proposition

  • Exposure to all the major economic regions through a worldwide geographical asset allocation

  • Tilted to academically proven drivers of returns through Evidence-based Investing principles through the DFA and Avantis Investors strategies.

  • Tilted to Environmental, Social, and Governance (ESG) investing factors.

  • Ability to quickly cap downside risk during financial market stress by reducing risky assets in favour of fixed income or money market instruments

  • Rules-based investment mandate combined with a strict adherence to a quantitative risk model that determines asset allocation according to the level of financial stress

  • Able to hold a maximum 100% equity allocation in low stress environments, and also able to allocate 100% to fixed income, money market assets or cash in high stress environments

  • Diversification potential through investing in index funds, which holds a broad basket of securities that track an index versus investing in individual securities

 
 

How is this Fund different from other funds?

To explain the differences, we first need to look at the characteristics of the most common types of unit trusts:

Types of Unit Trusts:

Unit Trusts (or funds) are typically categorised by the assets they invest into, for example:

  • Equity funds invest in companies listed on stock exchanges.

  • Fixed Income funds typically invest in bonds and give a fixed payout to investors.

  • Balanced funds invest in both equities and fixed income in a fixed or varying percentage e.g. 50% in equities and 50% in fixed income.

Specialised Unit Trusts like commodities, property, etc., are essentially equity funds as they invest in companies related to that particular sector.

Seldom Known Fact:

An important but seldom known fact is that typical funds cannot hold more than a fixed percentage of cash at any one time (to meet normal redemptions). Under normal market conditions, this is unimportant as investors expect their monies to be fully invested to try and maximise market opportunities.

Why is this important?

This fact becomes critical in extreme market situations, like what we witnessed in the 2008 financial crisis when equity markets fell (meaning investors are selling). At such times, the fund manager is only able to sell up to his maximum cash level (typically 5-10%) and can do nothing else. You can sell out of the fund, but would you know when to do so? Would you be selling at the worst possible time?

Of course, fund managers always try to add value by seeking out good stocks that they think will outperform the index. Unfortunately, when markets drop in extreme situations like in 2008, it takes a lot more effort and time to get back to where they were prior to the market collapse. e.g. If the fund were to drop 50% (as did quite a number of equity funds in 2008), they would need to rack up gains of at least 100% just to break even. So, that is why an important investment principle is not to lose money. However, the fund manager's hands may be tied in that he is unable to liquidate his equity holdings due to the stated mandate of the fund.

So, why is this Fund different?

In recognising this problem that fund managers face, we have removed the restriction on how much cash the fund manager can hold; so the fund manager is able to protect the asset values when faced with extreme market conditions, as they will be triggered by the quantitative risk model.

In other words, this fund can sell all of its equity and bond holdings (if the market situation calls for it) and hold up to 100% of its assets in cash, should the manager deem this the best strategy to protect the fund's assets.

On the other hand, when the risk model is showing benign market conditions, the manager will invest up to 100% of the assets to capture the upside and be in step with the market.

In summary, this Fund's rules-based and dynamic strategy seeks to take out the human emotions of investing and maximise potential returns during stronger growth and recovery periods, while minimising risks during difficult stages in an economic cycle.

 
 

Why should I invest in this Fund?

Investors may not have the kind of experience, knowledge or time to diversify their investments across regions, sectors and asset classes, as well as to continually adjust their asset allocation to adapt to varying market conditions.

We additionally quantify the risk in the markets through the proprietary risk model in order to identify low and high stress periods. This way, the asset allocation is adjusted according to how the market is expected to react during these different conditions.

The Fund was designed to be an "all-weather" fund – able to adapt to changing economic conditions so as to take advantage of bull markets, as well as being able to move to full cash positions if necessary to protect capital.

In investing, one needs to especially guard against strong emotions like greed (buying when the markets have risen) and fear (selling when the markets have fallen). By investing in this fund, you allow the professional fund managers to make the decisions objectively and free you to concentrate on the other important things in life.

 
 

Who is managing this Fund?

The United G Strategic Fund is managed by UOB Asset Management Ltd, with GYC Financial Advisory Pte Ltd as its investment adviser.

KIID