SINGAPORE–(BUSINESS WIRE)–In Singapore, as elsewhere, equity markets are facing heightened uncertainty stemming from rising inflation, slowing growth, the prospects of higher interest rates and geopolitical tensions. Amidst this unsettling shifting backdrop, investors may be wondering how to manage the resulting volatility within their portfolios or whether they should remain invested. Global investment management and research firm, AllianceBernstein (AB), says that exiting a rocky market instead of sticking it out may lead to worse results for nervous investors.
AllianceBernstein’s approach to low-volatility investing targets companies with three fundamental characteristics: quality, stability and price, in order to help mitigate downside risks and generate greater returns for investors when markets recover. AllianceBernstein finds that stocks of quality companies with stable performance patterns, and that are trading at attractive prices are a good way to navigate volatility.
“Investors may be tempted to rush for the exits in the face of short-term market pressures and wait for better times, but this can be a costly strategy over the long term. They may end up sacrificing good returns by de-risking their portfolios too much, too quickly, then fail to reap benefits during the subsequent recovery,” says Karen Lim, Managing Director, Southeast Asia Client Group. “Rather than pull money out of the market, investors could take a low-volatility approach to build a resilient portfolio that can weather different market conditions – one that can reduce losses in market declines, while capturing most of the upside in a rising market to deliver a smoother pattern of returns.”
Greater Resilience in Certain Sectors
While most sectors have not been spared from the widespread market selloff this year, certain sectors have turned out less volatile than others. The broad technology sector, for example, was one of the worst-hit sectors. But some technology stocks held up relatively well compared to previous downturns, suggesting that technology has become entrenched and indispensable today.
“The technology sector offers a wide spectrum of opportunities. While some companies represent a strong bet on future growth, others offer predictable cash flow streams that make them inherently defensive,” adds Karen. “Highly profitable businesses with largely recurring revenues, notably those with market or price leadership or those that provide indispensable products, tend to offer risk mitigation in periods of volatility, unlike their non-earning counterparts.”
Some healthcare and consumer companies have also remained resilient, despite the market turbulence. Within each of these sectors, there will be winners and losers, but AllianceBernstein has found that companies with strong cash flows and business models are likely to withstand market pressures and thrive in subsequent recoveries.
ESG – A Firmwide Approach
ESG considerations are deeply ingrained in AllianceBernstein’s investment decisions across the company’s active portfolios—and in the way it engages with portfolio company management and stakeholders. Besides integrating ESG factors into its research and investment processes, the firm has also developed a proprietary tool that leverages research insights from its global offices. By centralising ESG research, sharing insights across offices and tracking engagement, AllianceBernstein hopes to drive better investment outcomes for its clients.
AllianceBernstein brought its global investment management expertise to Singapore in 1993 and is committed to delivering better outcomes through research, portfolio management, wealth management, and client service. With 26 offices across the globe, investors can be reassured by the breadth and depth of investment capabilities with a strong history of meeting the needs of a diverse range of clients.
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