Our Returns in the Third Quarter of 2023

19 October 2023

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How a good defence was our best offence

The third quarter (Q3) of 2023 started off strong, with equity markets continuing a tech-fueled rally into July. But the markets lost momentum in August and September, as strong US economic data and sticky inflation led to a more hawkish tone from the US Federal Reserve. 

Given expectations that interest rates would remain ”higher for longer”, longer-term US yields rose, which pulled down bond prices (recall that bond yields and prices are inversely related). Stocks also gave up some of their year-to-date (YTD) gains due to those higher yields, with the technology sector being more sensitive to longer-term interest rates.

Ultimately, both the equity and bond markets ended the quarter lower than where they started, with global equities now up about 10% for the year to end-September, and bonds down 3%.

In our mid-year market outlook, we highlighted the importance of maintaining a more defensive positioning amid uncertainty over growth and inflation dynamics, which appears to be playing out now. This meant an overweight on short-dated US Treasury bills, given the attractive yield on cash-like assets.

Our defensive positioning helped us to largely outperform our benchmarks, both in Q3 and for the year to end-September. This positioning remains unchanged as our investment framework, ERAA®, continues to place us in a stagflationary regime.

With that in mind, let’s look at how our portfolios performed in Q3:

  • General Investing portfolios powered by StashAway
  • General Investing portfolios powered by BlackRock
  • Responsible Investing portfolios
  • Thematic portfolios
  • Income portfolio

General Investing portfolios powered by StashAway

StashAway’s General Investing (GI) portfolios declined across StashAway Risk Indexes (SRIs) during Q3. But due to a more defensive positioning, these declines were less pronounced than their same-risk benchmarks across the board. They were down -0.7% on average in SGD terms. Compared with an average -2.8% decline for their same-risk benchmarks, outperforming by +2.1 percentage points (ppt).

Taking a longer-term perspective, our portfolios remain in positive territory YTD, and have also largely outperformed their same-risk benchmarks. For the year to end-September they were up +6.5% on average versus average gains of +5.5% for their same-risk benchmarks, resulting in average outperformance of +1.0 ppt.

The rally in equities lost steam in Q3, but returns remain positive YTD

The past few months saw a pullback in equities as higher interest rates weighed on tech and other interest-rate sensitive sectors, like real estate and utilities. This weighed on our higher-risk SRIs, which have a higher exposure to broad-based equity indexes and technology stocks.

For the year to end-September however, our allocations to tech stocks and broad-based equity indexes were still the main drivers behind our portfolios’ positive performance – given how much they rallied in H1. This was especially the case in our higher-risk SRIs.

Pulling in the other direction, US energy stocks were also the main contributors among the equity allocations for our portfolios, with the sharp rise in oil prices over the summer contributing to the sector.

Short-dated bonds remained a cushion, while longer-dated bonds were hit in Q3

On the fixed income side, ERAA®’s allocations to short-dated US Treasury bills (T-bills) have remained the main contributor to our portfolios’ returns for both Q3 and YTD.

This is due to their still-high yields – with T-bills returning about 5.4% per annum as of end-September. Inflation-linked bonds have also been a source of support given the inflationary environment over the past year.

Over the course of Q3, however, longer-dated US Treasury bonds took a hit amid more hawkish rhetoric from central banks, and the potential for interest rates to rise further and stay there for longer. As a result, our allocation to longer-duration US Treasuries were a detractor to our portfolios during the period. That said, we are underweight in longer-dated bonds compared to our benchmarks, which contributed to our relative outperformance.

Gold posted losses in Q3, but hasn’t lost its lustre as a defensive asset

Our allocations to gold were also a detractor in Q3 as increasing bond yields, a strong US dollar, and the “higher for longer” narrative mentioned above weighed on prices of the precious metal. During the quarter, gold posted returns of -2.8% in SGD terms.

But over a longer time horizon, gold can still play the role of a defensive asset in diversified portfolios. Amid this year’s volatile market, gold posted returns of +3.1% YTD in SGD terms. Looking ahead: the potential for an eventual recession in the US and other economies, as well as the impact of recent geopolitical turmoil in the Middle East, point to sources of support for gold.

Our defensive allocations continued to shield our portfolios from volatility and drawdowns

The relatively defensive nature of our portfolios continued to protect our portfolios during the renewed bouts of market volatility during the past few months – especially so in our lower-risk SRIs. On average, our asset allocations had annualised volatility (in USD terms) of 5.6% versus 7.6% for our benchmarks for the year to end-September. 

Our portfolios’ lower volatility has resulted in shallower drawdowns, which helps relative performance over a longer period of time – as shown by the widening outperformance of our portfolios versus their benchmarks in the chart below. 

It also results in higher risk-adjusted returns, which accounts for the amount of risk you take on to achieve returns. Our portfolios have had a higher average Sharpe ratio of 1.0 for the year to September, compared with 0.4 for their same-risk benchmarks. (The Sharpe ratio is the annualised average daily returns divided by the annualised standard deviation (ie, volatility) of those returns. For simplicity, we set the risk-free rate to zero.)

General Investing portfolios powered by BlackRock

Our General Investing (GI) portfolios powered by BlackRock similarly posted losses in Q3 amid the reversal in global equity and bond markets. They were down about -1.9% on average in SGD terms, in line with losses of -1.9% on average for their benchmarks. For the year to end-September, they were up +7.8% on average, versus average gains of +8.5% for their benchmarks.

For a detailed commentary on the latest reoptimisation by BlackRock, read here.

Responsible Investing portfolios

Our Responsible Investing (RI) portfolios, which optimise for both long-term returns and ESG impact, faced similar headwinds in Q3. They were down -1.3% on average in SGD terms. That compares with a -2.7% decline on average for their same-risk benchmarks, resulting in outperformance of +1.4 ppt. But over a longer time horizon, our portfolios remained in positive territory and also mostly outperformed their same-risk benchmarks. For the year to end-September they were up +7.5% on average, compared with a +7.0% gain on average for their same-risk benchmarks. That resulted in outperformance of +0.4 ppt.

Similar to our GI portfolios, our RI portfolios benefited from our overweight allocations to short-duration US T-bills, while their exposure to longer-duration bonds and the tech sector were the main detractors over the course of Q3. For the year to end-September however, allocations to tech and broad-based equities were main contributors to their solid, positive performance.

Income portfolio

Our Singapore Income portfolio posted losses of -0.7% in SGD terms in Q3 amid the renewed slide in bond markets we described above. But taking a longer-term view of its performance, the portfolio posted a gain of +1.6% for the year to end-September.

Both periods showed significant outperformance relative to broad-based income funds. For example, the SGD-hedged Bloomberg Global Aggregate bond index posted losses of -2.2% in Q3 and -0.4% YTD.

The relative outperformance of our Income portfolio comes from our allocations to an SGD money market fund (+0.8% gain in Q3, +2.4% gain YTD), SGD investment-grade corporate bonds (Q3: +0.9%; YTD: +5.4%), and the Straits Times Index (Q3: +2.1%; YTD: +3%).

Thematic portfolios

The recent pullback in equity and bond markets also weighed on our thematic portfolios in Q3. Our Technology Enablers and Future of Consumer Tech portfolios, which saw large gains this year on the back of investor enthusiasm in the tech sector, are still up for the year to end-September. But the market environment pulled returns for our Healthcare Innovation and Environment and Cleantech portfolios into negative territory YTD.

It’s important to remember that our thematic portfolios are designed for investors to take a longer-term view on their respective themes, with more defensive, balancing assets to help reduce volatility along the way. Periods of market volatility, like we have today, could present a window of opportunity to enter or add exposure to these trends.

Technology Enablers

Our Technology Enablers portfolio posted losses of -1.7% on average in SGD terms during Q3. However, for the year to end-September, they were still up +18.6% on average.

Aside from the cloud computing sector, most thematic assets in this portfolio posted negative returns in Q3 – though the rally from earlier this year meant that returns remained in the double-digits across the board YTD.

Among our balancing assets, allocations to short-duration US T-bills have remained a source of support in Q3 and YTD. Allocations to longer-duration bonds and gold however, were detractors over the past quarter.

Future of Consumer Tech

Our Future of Consumer Tech portfolios also posted losses in Q3, of -3.7% on average in SGD terms. But similar to our Technology Enablers portfolio, their YTD gains remain strong, +14.2% on average.

The thematic sectors in this portfolio posted declines across the board in Q3, for the reasons described above, but largely remained in the double-digits YTD. Similar to our Technology Enablers portfolio, short-dated US Treasuries were the main contributors this year, while longer-dated bonds and gold detracted in Q3.

Healthcare Innovation

Our Healthcare Innovation portfolios posted losses of -6.5% on average in SGD terms in Q3. That brought YTD returns into negative territory, or -2.1% on average.

The largest drags on performance during both Q3 and YTD came from the genomics and healthtech sub-sectors. Modest positive performance in pharmaceuticals pulled in the other direction, as did our allocations to short-duration US T-bills.

Environment and Cleantech

Our Environment and Cleantech portfolios posted losses of -10.3% on average in SGD terms in Q3. As with our Healthcare Innovation portfolios, that resulted in negative YTD returns, or -3.2% on average.

Thematic and balancing assets in the portfolio were down across the board as result of the market downturn in Q3. But strong performance from the energy infrastructure, environmental services, and water sectors helped to mitigate losses in our lower-risk SRIs YTD.


Our same-risk benchmarks are proxied by MSCI AC World Index (for equities) and FTSE World Government Bond Index (for bonds). The benchmarks we use have the same 10-years realised volatility as our portfolios.

Model portfolio returns are expressed in gross terms before fees, withholding taxes, and reclaims on dividends. They are provided only as a gauge of pure performance before other items.

Actual account returns may deviate from the model portfolios due to differences in the timing of trade execution (e.g. during the day vs close), timing differences and intraday volatility of reoptimisation and re-balancing, fees, dividend taxes and reclaims, etc. All returns are in SGD terms.

Past performance is not a guarantee for future returns. Before investing, investors should carefully consider investment objectives, risks, charges and expenses, and if need be, seek independent professional advice.

This communication is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to purchase any financial product or subscribe or enter any transaction.

This communication does not take into account your personal circumstances, e.g. investment objectives, financial situation or particular needs, and shall not constitute financial advice. You should consult your own independent financial, accounting, tax, legal or other competent professional advisors.

This information should not be relied upon as investment advice, research, or a recommendation by BlackRock regarding (i) the iShares Funds, (ii) the use or suitability of the model portfolios or (iii) any security in particular. Only an investor and their financial advisor know enough about their circumstances to make an investment decision. Past Performance is not a reliable indicator of future results and should not be the sole factor of consideration when selecting a product or strategy.

For StashAway General Investing portfolios that are powered by BlackRock, BlackRock provides StashAway with non-binding asset allocation guidance. StashAway manages and provides these portfolios to you, meaning BlackRock does not provide any service or product to you, nor has BlackRock considered the suitability of its asset allocations against your individual needs, objectives, and risk tolerance. As such, the asset allocations that BlackRock provides do not constitute investment advice, or an offer to sell or buy any securities.

BlackRock® is a registered trademark of BlackRock, Inc. and its affiliates (“BlackRock”) and is used under license. BlackRock is not affiliated with StashAway and therefore makes no representations or warranties regarding the advisability of investing in any product or service offered by StashAway. BlackRock has no obligation or liability in connection with the operation, marketing, trading or sale of such product or service nor does BlackRock have any obligation or liability to any client or customer of StashAway.

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