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AIA FUND INSIGHTS

INVESTING IN 2021 – RECOVERING FROM COVID-19

Quarter 1, 2021

Vaccine optimism has fueled expectations of a synchronized global GDP reacceleration in 2021. Furthermore, policymakers in developed economies have indicated that they will remain accommodative for the foreseeable three to four years with easy monetary and fiscal policies at least until global outputs and activities return to pre-Covid trend.

As such, 2021 is set to continue into the expansion phase of the business cycle, plowing through the year with an expectation for strong equity returns amid an environment characterized by the acceleration in economic growth, unabated policy support, negative real interest rates and excess liquidity, which should propel equities to outperform bonds.

Beyond 2021, fading stimulus in 2022 & slightly lower potential growth than before Covid-19 will see global economies returning to normalization (blue line).

Early cycle recovery should benefit cyclicals the most – including sectors such as Industrials, Consumer Discretionary, Materials, and some Financials. Those that were most impacted by the Covid-19 restrictions should return to favor, narrowing the performance gap against “Covid-winners” (Eg: Technology and eCommerce). However this value-rotation narrative may not persist as the excess liquidity in the system may once again see investors focusing towards growth stocks.

Thus far, China has recovered more rapidly than other leading economies. The different policies and pace of economic recovery will see global economies returning to pre-Covid GDP at different pace. Selective Asia markets should benefit from the expected easing of geopolitical tensions, the chase for yield and return by developed market investors, and the unleashing of precautionary liquidity (see chart below).

Source: AIA Investment Management

How should I manage my investment portfolio?

The pandemic remains a major source of risk to the economy and some form of social distancing measures is expected to remain in place. In addition, President-elect Biden will enter the White House facing one of the most challenging geopolitical backdrop in decades.

With risks abound amidst an expected economic expansion cycle, it is crucial to:

stay invested for the long term, looking through any near-term market volatility
not be distracted by short-term trends and fads

Strategies that are carefully constructed to align long-term and sustainable themes, managed by best-in-class asset managers with proven expertise and capabilities will prove useful to navigate the road ahead.

Over in AIA, we encourage long-term value creation by taking an active role in portfolio management as well as applying professional stewardship and oversight in the partnership with external managers (who have established track record of delivering performance over long term).

Value Proposition of AIA Investment

Source: AIA Investment Management

AIA Singapore, in partnership with AIA Investment Management, have curated bespoke wealth solutions, AIA Platinum Wealth Elite and AIA Platinum Retirement Elite. These solutions are designed to suit your goals and risk preference, while providing the flexibility to adapt to changing aspirations and circumstances, optimizing long-term returns and financial stability to meet the different milestones in life (Eg: Retirement and Legacy needs).

Disclaimer

AIA Singapore Private Limited

- COLLAPSE + EXPAND

This publication is for your information only and does not have regard to the specific investment objectives, financial situation and particular needs of any persons. It is intended only to be a simplified description of the product features applicable to these plans and is not exhaustive.

AIA Platinum Wealth Elite and AIA Platinum Retirement Elite are investment-linked insurance policies which invest in investment-linked policy (ILP) sub-fund(s). Investments in these plans are subject to investment risk including the possible loss of the principal amount invested. The performance of the ILP sub-fund(s) is not guaranteed and the value of the units in the ILP sub-fund(s) and the income accruing to the units, if any, may fall or rise. Past performance is not necessarily indicative of the future performance of the ILP sub-fund(s).

Investment risks include foreign exchange risks for US$ denominated policies, as such the Singapore dollar return will depend on prevailing exchange rate which may be highly volatile.

These insurance plans are underwritten by AIA Singapore Private Limited (Reg. No. 201106386R) (“AIA”). All insurance applications are subjected to AIA’s underwriting and acceptance. This publication is not a contract of insurance. The precise terms and conditions of these plans, including exclusions whereby the benefits under your policy may not be paid out, are specified in the policy contract. You are advised to read the policy contract.

The actual Policy Value will depend on the actual performance of the policy as well as any alterations such as variation in the Insured Amount or premium, such as premium holiday or partial withdrawals. There is a possibility that the Policy Value will fall to zero and in this case, policyholder can avoid the policy lapsing by topping up additional premium.

You should seek advice from a qualified advisor and read the product summary and product highlights sheet(s) before deciding whether the product is suitable for you. A product summary and product highlights sheet(s) relating to the ILP sub-fund(s) are available and may be obtained from your AIA Financial Services Consultant or Insurance Representative. A potential investor should read the product summary and product highlights sheet(s) before deciding whether to subscribe for the ILP sub-fund(s).

As buying a life insurance policy is a long-term commitment, an early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premium paid. You should consider carefully before terminating the policy or switching to a new one as there may be disadvantages in doing so. The new policy may cost more or have fewer benefits at the same cost. Protected up to specific limits by SDIC. This advertisement has not been reviewed by the Monetary Authority of Singapore.

The information in this publication is correct as at 29 December 2020.

AIA Investment Management Pte. Ltd.

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This document/presentation has been prepared for information purposes only and does not have regard to the specific investment objectives, financial situation and particular needs of any persons. Neither should this document be construed as an offer or the solicitation of an offer, recommendation or solicitation to enter into any transaction or adopt any hedging, trading or investment strategy, in relation to any securities or other financial instruments issued or managed by AIA Investment Management Private Limited (“AIAIM”) or its affiliates (collectively the “AIA Group”) in any jurisdiction in which such offer is not authorised to be made to any person. Nothing in this document/presentation should be construed as investment, tax, legal or other advice. References to specific securities are presented to illustrate the application of our investment philosophy only and are not to be considered as recommendation by the AIA Group.

The information herein should not be used as the basis of any investment decision. This document/presentation is not research material and it has not been prepared in accordance with legal requirements designed to promote the independence of investment research. All views expressed and references to specific securities are included for illustrations only and does not necessarily represent the views of every function within the AIA Group. No representations or warranties are given as to the reliability, accuracy and completeness of the information. Opinions, projections, estimates and other information presented in this document/presentation are solely those of AIA Group as at the date of this document/presentation and subject to change without notice. The AIA Group may have interests in the securities or instruments mentioned in this document/presentation.

Past performance figures, and any economic and market trends or forecast, are not necessarily indicative of future performance of any strategy or portfolio. Investment is subject to investment risk, including the possible loss of the principal amount invested.

AIAIM and the AIA Group, their respective officers and employees, accept no liability for any damage or loss, including loss of profit, whether direct or indirect or consequential in respect of the use or reliance of any information contained herein and whether arising as a result of AIAIM’s negligence or otherwise.

You may wish to seek advice from a financial adviser before making a commitment to invest. You should consider carefully whether an investment is suitable for you in light of your own circumstances, financial resources and entire investment programme.

This document/presentation may only be used and/or received in accordance with the applicable laws in your jurisdiction.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

AIA Investment Management Private Limited (UEN Registration No. 201616304H).

Generating Regular Income in Today’s Low Yield Environment

Quarter 4, 2020

Global interest rates have been on the decline for years as inflation moderates alongside increasing global savings. Taking the US Federal Reserve rate as an example, the Fed rate has been declining since the high of nearly 20% during the 80’s to today’s low of nearly zero. With the current Covid-19 pandemic, governments and central banks across the world have undertaken massive, unprecedented stimulus policies to help economics recover. Looking ahead, interest rates will likely remain low for a while as guided by Fed and the other major central banks.

Source: Board of Governors of the Federal Reserve System (US)

Current low interest rate environment poses a challenge for investors seeking steady income with traditional fixed income yields dropping lower. As a result, generating healthy and regular level of income through traditional* sources will prove harder moving forward (as seen in diagram below). Thus, it is important to look wider for complementary* sources of income to supplement existing means.

*Traditional income sources refer to dividends/income derived from asset classes like equities and bonds. Complementary income sources refer to dividend/income derived from alternate sources like covered call options, to help balance the trade-off between income, returns and risk.

Investors will therefore be confronted with today’s income challenge of “Low for longer” and a “New Norm” whereby there is an increasing need to adopt the right investment strategy to manage the overall portfolio risk while adding new income sources to complement existing ones.

Source: AIA Investment Management

To help customer build and generate regular income in the long run, AIA Singapore partnered AIA Investments in September 2020 to curate the AIA Global Dynamic Income Fund. It is available for your selection only via AIA Invest Easy, an Investment-Linked Plan. Managed by AIA Investment Management and backed by the expertise of world class asset managers, with the aim to distribute regular income and total returns over the long-term, through a variety of attractive income-generating asset classes.

Source: AIA Singapore

The ILP Sub-Fund aims to distribute dividends of 4 to 5% p.a. on a quarterly basis. Investors should take note that dividend distributions could change according to prevailing market conditions. Both capital and dividend distributions are not guaranteed. Dividend rate does not represent the overall return of the fund, and a high distribution yield does not imply a positive or high return on the total investments. Dividend rate will be declared in S$ per unit and the resulting % dividend yield p.a. is calculated based on (Dividend rate/Ex-Date NAV)*(4*100). AIA Singapore will review dividend distribution periodically, and has the sole discretion to determine the dividend rate and frequency of the distribution.

AIA Singapore intends to distribute dividends from the income and/or net realised gains of the ILP Sub-Fund, and AIA Singapore maintains the discretion to distribute dividends out of capital. Investors should be aware that when dividend distributions are made out of the capital, it may lead to a reduction in investor’s original investment and may also result in reduced future returns to the investor.

When dividend distributions are declared and paid out with respect to the ILP Sub-Fund, the net assets of the ILP Sub-Fund will reduce by an amount equivalent to the distributions declared. This will be reflected as a reduction in the unit price.

Traditional income sources refer to dividends/income derived from asset classes like equities and bonds. Complementary income sources refer to dividend/income derived from alternate sources like covered call options, to help balance the trade-off between income, returns and risk.

How to apply

Invest a minimum of S$12,000 in cashor via Supplementary Retirement Scheme (SRS) through the AIA Invest Easy plan. Speak to your AIA Financial Services Consultant/Insurance Representative or find out more at aia.com.sg/investeasy

Existing AIA Invest Easy customers may perform a fund switch or regular/ad-hoc top-up(s) into this fund.