Incredible rally that overstretched.

Since this email, stock markets have stretched another 2.6% in terms of the MSCI World.


Just sharing. I cannot be right all the time. I can be early, for example, I spoke about a Christmas Rally in Dec 2018. It did not occur until AFTER Christmas. That’s 3 weeks late. Similarly, the pullback has not happened as the MSCI World continued to inch upwards. Earnings growth in the US were above expectations, up 16% thereabouts, revenue up 7% YOY for the quarter. Not bad. There’s no slow down in corporate America and it seems trade war doesn’t affect them. In the west, consumption takes up 70% of GDP and they are not export dependent. But in Asia, we are the factories of the world. Export is our lifeblood and I think we will be hit.

Chronology of how I viewed the markets

Let me set the record straight.

1.       I was bullish on EM stocks since March 2016. Those of you who followed this call made between 20 – 30% from the last rally over 2 years.
2.       Around early 2018 I was already cautious on the stock markets but there was no sell signals.  I shared that I was positive on stock markets in general up to around March 2018. The BEARISH signal was triggered from March 2018 onwards. Since then, we have been reducing equity exposure from March to September 2018.
3.       From November I thought the markets are badly oversold and a Christmas rebound is likely to happen. So I advised most of you not to sell equities from Nov onwards. True enough, stock markets rally massively from Christmas onwards, more than I expected.
4.        I now think it is a good time to reduce equities if you have exposure above your recommended amount.

At this point, I must caution that you may wish to reduce SOME equity exposure. Some of the Emerging Markets are beginning to correct. Some of you have bought HSBC Brazil and you’re up by 10 – 15%, especially when you bought in Dec based on our discussion. Good on you. But it’s already beginning to pull back and there's a chance that these markets (Brazil, Russia) lead in terms of price action. They are “canaries in the coalmines”. The pull-back could be mild, like 5 – 10% or could be severe, between 15 – 20%.


How have you performed?

At this point, those of you who started investing with me in late 2017 or early 2018, when stock markets are at their peak, you are down by between 1 to 5%. With leverage it could be 2 to 10%, depending how closely we work together. It is very near breakeven. I tried to usher you to buy bond funds instead of bonds so none of the bonds you have bought in the last 2 years have defaulted.

Those who started after March 2018, when signals are emerging that we may see a huge correction, you did nothing but mostly H2O Multibonds, you are probably up between 3 and 15%. Some of you are up close to 20%.

Thank you for working with me. This good result cannot happen without your cooperation and trust.

H2O Multibonds did turn out to the BEST performer in the last one year, up 37%.

I suggest that you do the following:

1.       Reduce leverage slightly
2.       Replace your portfolio from those dividend paying bond and balanced funds with products that can generate over 10% IRR whether bull or bear. E.g. H2O Multibonds achieved 18% IRR historically. Oaktree targets 10 – 12% IRR.
3.       These products have zero or very low AR so you need to reduce your leverage.
4.       We aim for full recovery by June and by end 2019, we try hit over 5% return for those who started before March 2018. For those who started AFTER March 2018, we aim to achieve 10% or more.


There will be a few more exciting products coming on board in 2019, that can achieve > 10% IRR with stability. One of them is a China Long Short fund which achieved positive return when the Shanghai Composite was down 35%! Another is a market neutral fund that achieved around 10% IRR with low volatility. Try to raise the expected return of your portfolio to OVER 10% with these all weather products. We’ll try to find another H2O Multibonds but it’s going to be difficult. 33% return in 2018 was an exceptional year! Let’s work together to make 2019 a good year for your wealth! Gongxifacai! 恭喜发财, 万事如意



























Fund Name
Category
Currency
Share Type
Distribution Frequency
Hedged/
Unhedged
ISIN
BB Ticker
Risk
Rating
AR
Fund name under Order Form
(DIS refers to Cash Distribution
REI refers to Share Distribution)
Remarks
Last Bloomberg Update
Latest NAV
3 Mths Return (%)
YTD Return (%)
1 Yr Return (%)
3 Yr Ann Return (%)
5 Yr Ann Return (%)
3 Yr Ann Std Dev
(%)
12Mth Div Yield (Gross)
Launch Date
Factsheet / Offering Material Link
H2O Multibonds Fund
(5% entry fee wef 1 Feb 2019)
Hedge Funds - Global Macro
USD
ACCUMULATION
N/A
HEDGED
FR0011973676
NH24HRC FP Equity
5
0%
H2O MULTIBONDS HUSD RC ACC
Daily Liquidity
25% performance fee
Hurdle rate: USD 1-mth LIBOR + 2.60% p.a.
2/8/2019
    261.81
       9.46
       3.47
     37.15
     31.66
          -  
     18.32
          -  
 6/23/2014
Link
Neuberger Berman US Real Estate Securities Fund
Equity - Global Real Estate
USD
ACCUMULATION
N/A
UNHEDGED
IE00B0T0GQ85
NBIUSRA ID Equity
4
55%
NEUBERGER BERM US REAL EST ADV ACC

2/11/2019
     19.62
       5.77
     11.86
     13.87
       9.11
       6.83
     13.24
          -  
 2/1/2006
Link
JPMorgan Funds - Emerging Middle East Equity Fund
Equity - Middle East
USD
DISTRIBUTION
ANNUAL
UNHEDGED
LU0083573666
FLEMEFI LX Equity
4
55%
N/A

2/11/2019
     23.29
       7.23
       6.64
     12.05
     12.23
       2.58
     11.20
       1.51
 5/18/1998
Link
Pictet Funds - Water
(subject to quota availability, please check before placing orders)
Equity - Water
USD
ACCUMULATION
N/A
HEDGED
LU0385405567
PFLWAHP LX Equity
4
55%
PICTET - WATER HP USD ACC

2/11/2019
    405.80
       3.96
     10.70
     11.13
     11.85
       9.82
       9.69
          -  
 10/15/2008
Link
Invesco Global Real Estate Securities
Equity - Global Real Estate
USD
DISTRIBUTION
ANNUAL
UNHEDGED
LU1775977595
IVRESAD LX Equity
4
55%
N/A

2/11/2019
     12.75
       5.81
     10.68
       9.83
       7.72
       4.20
     11.62
       0.84
 8/10/2018
Link
JPMorgan US Small Cap Growth Fund
Equity - US Small Cap
USD
DISTRIBUTION
ANNUAL
UNHEDGED
LU0053671581
FLEFAFI LX Equity
4
55%
N/A

2/11/2019
    220.26
       3.83
     15.28
       8.95
     27.71
       8.40
     17.96
       0.00
 9/11/1984
Link
H2O Adagio Fund
(5% entry fee wef 1 Feb 2019)
Fixed Income - Global Blend
USD
ACCUMULATION
N/A
HEDGED
FR0011981745
NH2HURC FP Equity
3
70%
H2O ADAGIO-USDC ACC
25% performance fee
Hurdle rate: USD 1-mth LIBOR + 0.6% p.a.
2/8/2019
    121.81
       2.04
       0.28
       6.53
       7.48
          -  
       3.95
          -  
 9/8/2014
Link
FTIF-Franklin US Opportunities Fund
Equity - US Equity Growth
USD
ACCUMULATION
N/A
UNHEDGED
LU0109391861
TEMAGAI LX Equity
3
70%
FTIF -FRANKLIN U.S.OPPORT FUND ACC [TEMAGAI LX]

2/11/2019
     16.49
       3.84
     11.42
       6.46
     17.04
       8.47
     13.63
          -  
 4/3/2000
Link
Morgan Stanley Global Brands Fund
Equity - Global Blend
USD
DISTRIBUTION
SEMI-ANNUAL
UNHEDGED
LU0239683559
MORGBAX LX Equity
3
70%
N/A

2/11/2019
     51.39
       0.23
       5.89
       6.06
     12.75
       8.84
       9.36
       0.29
 10/25/2010
Link
Morgan Stanley Global Property Fund
Equity - Global Real Estate
USD
ACCUMULATION
N/A
UNHEDGED
LU0266114312
MORGPRA LX Equity
4
55%
MORGAN ST INV FD GB PROPERTY- A ACC

2/11/2019
     30.79
       4.55
     10.20
       5.70
       7.51
       3.45
     11.93
          -  
 10/31/2006
Link
Pictet - Premium Brands
Equity - Consumer Discretionary
USD
ACCUMULATION
N/A
HEDGED
LU0552610593
PPGPHPU LX Equity
4
55%
PICTET PREMIUM BRANDS ACC USD

2/11/2019
    211.33
       0.13
       8.92
       5.65
     10.62
       5.13
       9.43
          -  
 11/16/2010
Link
Wellington Global Healthcare Equity Fund
(subject to quota availability, please check before placing orders)
Equity - Health Care
USD
ACCUMULATION
N/A
UNHEDGED
IE00B00LSD17
WGHCEPB ID Equity
4
55%
WELL GBL H CARE EQ-D USD AC ACC

2/11/2019
     33.37
      (0.34)
       9.13
       5.08
     12.32
       9.35
     16.05
          -  
 9/30/2006
Link
Vontobel Fund - US Equity
Equity - US Equity Growth
USD
DISTRIBUTION
ANNUAL
UNHEDGED
LU0035763456
VONUVAI LX Equity
3
70%
VONTOBEL - US EQUITY A USD DIS

2/8/2019
1,033.42
       0.15
       7.19
       5.06
     15.34
     10.71
     10.49
          -  
 11/21/1991
Link


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