We've Added New Asset Classes and Geographies to Your Investments

Freddy Lim

Co-founder and CIO

14 August 2019

At StashAway, we’re always seeking ways to introduce even more innovative solutions to help you achieve your long-term financial goals. We’re pleased to announce that we are introducing additional differentiated asset classes to your portfolios. With this re-optimisation, we’re adding more asset types and geographies in order to expand our system’s options to deliver even more intelligent diversification to your investments. If you have auto-reoptimisation on, we will execute the trades once you review the changes, or on the 28th of August if you don't review them. If you have auto-reoptimisation off, then you will need to confirm this change manually.

About the introduction of 13 new asset classes

Our system will now have 32 asset classes from which to choose when building your portfolios (previously, we had selected 19 asset types). These additions increase your potential exposure to more asset classes and geographies so you can seek returns from even more investment pockets depending on the economic environment. 

We’ve added commodity-exporting countries, such as Canada and Australia; and, we’ve expanded equity sectors to include healthcare, energy, and finance. We’ve also widened our scope in fixed income, including more bonds, such as international treasury bonds. Finally, we’ve introduced some interesting asset classes, such as Emerging Market bonds, global ex-US REITs, floating-rate bonds, and global ex-US inflation-linked bonds. Here’s the full list of assets that our system considers. 

Globally-diversified portfolios are key for long-term investing

An intelligently globally-diversified portfolio exposes an investor to more pockets of returns from less correlated asset classes, sectors, structures, and parts of the world. This diversification is more important than ever, as we’re seeing firsthand how the growth of different economies can diverge from each other: Today, the US economy remains solid while export-oriented countries’ economies, such as South Korea and Singapore, are slowing. Some attribute this slowdown to the disruptions brought about by the US-China trade war. Others believe that the cyclical slowdown was already in place before the trade war. Regardless of the cause of the slowdown, the key takeaway is that economies don’t grow or contract in tandem. So, to maximise your exposure to growth, you now have even more geographies, sectors, and asset classes in your portfolios. 

What does this mean for your investments?

These new asset types are now part of the wider selection from which our system can select in order to best equip your investments depending on the economic environment. 

In the short term, you won’t see every single one of these assets and geographies in your portfolio at once; in fact, you will still have the same number of asset types (between 7 and 12 asset classes) in your portfolio. 

Going forward, your portfolios will have even more power to face economic conditions. Over time, as the economic regime changes and your portfolios re-optimise, you’ll see a range of asset classes rotate in and out your portfolio to protect your capital and increase your long-term returns.

As with any rebalancing or re-optimisation, there will be a few transaction costs that we’ll cover, as we always do. In other words, this re-optimisation doesn’t cost you a thing.

A reminder of our focus on risk management

Our investment framework, ERAA® (Economic Regime-based Asset Allocation), looks at two major types of economic indicators: growth and inflation. Your returns are derived from the economy’s ability to grow, while inflation works in opposition to growth, as it dilutes the purchasing power of these returns. Our system constantly monitors and evaluates macroeconomic data and leading indicators to understand where the economy is heading, and at what pace. 

Ultimately, an investor’s mid-to-long-term performance is driven by economic data, and so by following these economic signals, ERAA® reduces your investment’s exposure to large and long drawdowns (bear markets), and maximises returns’ growth when the economy is doing well, given your own target risk level. 

Our system monitors economic data, and then sets target allocations to reflect the economic environment, as each asset’s returns and volatility behave differently in different economic environments, and so do correlations across different asset classes. To enhance risk-adjusted returns for our customers, StashAway adapts each portfolio’s asset allocations to medium-term economic cycles by harnessing each asset’s characteristic behaviour in the given regime.

The ultimate goal is to deliver competitive returns at the appropriate level of risk and at a fraction of the cost incurred by traditional strategies.

If you want to learn more, you can join us for a webinar on the changes. Sign up for it here.

As always, if you have any questions, you can reach out to our client engagement team support@stashaway.sg, or call or WhatsApp us at +65 6248 0889 Mon-Fri 9:00 AM-6:00 PM SGT (excluding public holidays). On WhatsApp, we'll get back to you in 1-2 business days.

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