Two of DBS Private Bank’s flagship product collectively raised over S$1.6 billion (US$1.19 billion) in assets under management (AUM) amid stronger interest in sustainable investing and demand for volatile market resilient investment strategies.
The DBS Chief Investment Office (CIO) Barbell Income Fund drew around $S970 million in less than six weeks, and the MSCI EM Asia ESG Leaders Outperformance Trade raised over S$690 million, a-seven-fold jump from its original launch in 2018.
The Barbell Income Fund references the DBS CIO Barbell Strategy Portfolio, which mirrors the CIO’s high-conviction investment calls. As of March 10 2021, this portfolio has clocked a performance of 26% net of fees, outperforming the composite benchmark by close to 7%.
The fund, launched in February, is a multi-asset fund with a strategic asset allocation of 50% equities, 45% fixed income, and 5% cash, and aims to distribute 3% to 4% per year to investors via quarterly distribution. Unlike the DBS CIO Barbell Note, its capital appreciation-focused predecessor, the Barbell Income Fund seeks to generate yield through exposure to high-dividend stocks, and employs covered call writing on select growth stocks to extract additional income.
“We can expect rates to stay at ultra-low levels in the foreseeable future as a result of structural changes in global demographics, and the trend towards digitalisation,” says Hou Wey Fook, chief investment officer at DBS Bank. “In this new normal, investors cannot rely on a traditional portfolio strategy that utilises bonds only – a more robust multi-asset strategy is better positioned to enhance portfolio yield, with covered calls serving as an added income stream.”
Following the success of the first ESG Outperformance Trade, which was the first-of-its-kind in Asia when launched in 2018, DBS Private Bank rolled out a new tranche in October 2020.
The ESG Outperformance Trade is a three-year outperformance warrant, designed to demonstrate that investing based on environmental, social and governance (ESG) principles improves portfolio risk-return characteristics and generates superior returns in the long-term. The 2018 Outperformance Trade, which is due to expire in November this year, has delivered an average return on investment of close to 100% till date since launch. Over 90% of invested clients have unwound their trades to book profits.
“Our confidence in this trade was bolstered by the outperformance of the 2018 trade, which supported our investment thesis that ESG-compliant companies do outperform in the long run,” points out Joseph Poon, group head of DBS Private Bank. “In addition, it also shows that our ongoing efforts in engaging and empowering clients to invest with an ESG lens is paying off.”