Important information

Eastspring Investments - Asian Low Volatility Equity Fund is referred to the ‘Fund’.
The Fund invests in equities and is exposed to the risk of market price fluctuations.
Given the investment strategy of the Fund, investors should note that lower volatility does not necessarily mean low risk. The Fund may not produce lower price variability as compared to the overall market and the Fund may be precluded from fully capturing the upside in rising markets. The investments selected using the systematic models may perform differently than expected.
The Fund invests primarily in the Asia Pacific ex Japan region and may be more volatile than a diversified fund.
The Fund’s investments in emerging markets subject it to greater political, tax, economic, foreign exchange, liquidity and regulatory risks.
The Fund may incur substantial losses if it is unable to sell those investments with high liquidity risks at opportune times or prices.
The Fund may invest in securities denominated in currencies other than the Fund’s base currency and may be exposed to currency and exchange rates risk.
The Fund may use financial derivatives instruments (FDIs) for hedging and efficient portfolio management purposes. Using FDIs may expose the Fund to market risk, management risk, credit risk, counterparty risk, liquidity risk, volatility risk, operational risk, leverage risk, valuation risk and over-the-counter transaction risk. The use of such instruments may be ineffective and the Fund may incur significant losses.
The Fund's Board of Directors may, at its discretion, pay dividends out of capital or gross income while charging all or part of the fees and expenses to the Fund’s capital, resulting in higher distributable income. Thus, the Fund may effectively pay dividends out of capital. Payment of dividends out of capital (effectively or not) amounts to a return or withdrawal of part of an investor’s original investment or from any capital gains attributable to that original investment, which may result in an immediate reduction of the net asset value per share.
Investment involves risk. Investors should not rely solely on this document in making investment decision. Past performance information presented is not indicative of future performance.

Investing in volatile equity markets

Heightened market volatility episodes have become more frequent in recent years. Whether it is related to uncertainty over the COVID-19 recovery, China’s property market woes, the US Fed tightening or the Russia-Ukraine crisis, these episodes generally occur without much warning and can trigger several fast and deep corrections.

Investing and staying invested in such volatile markets can be challenging for both new and seasoned investors. With a low volatility strategy, investors can better navigate market swings and limit the downside in their portfolios.

Merits of a low volatility strategy

Minimise losses with a low volatility strategy

Helps minimise
losses

A low volatility strategy helps to minimise the losses by falling less than the market during turbulent times. This helps investors stay invested, reduce their risk of exiting the market just before a recovery, and missing the market’s best days.

Gain more from a faster recovery through a low volatility strategy

Gains more from
a faster recovery

A low volatility strategy typically recovers faster from market selloffs as it needs to rise by a smaller magnitude to return to the previous starting level. This effect compounds over time and a low volatility portfolio could accumulate more wealth over the long term.

Enhances overall returns while reducing risk

Investors who prefer broader equity exposures and wish to remain fully invested in equities even during periods of elevated volatility can consider complementing their portfolios with a low volatility strategy to achieve higher risk-adjusted returns.

Volatility will continue to be a natural part of the global financial markets’ landscape. At the same time, market volatility can be a good time to take advantage of emerging investment opportunities. While the benefits of low vol strategies are evident, relying on a single factor approach i.e., low volatility, may not be always effective in achieving the lower drawdowns yet broader market participation that many investors desire. This is why low volatility funds that consider a large universe of stocks rather than only focusing on stocks with low vol characteristics are more effective.

Eastspring Investments –
Asian Low Volatility Equity Fund

Exhibits relative resilience versus the broader Asian equity strategy

Buffers against inflation given its historical distribution payout* of 3.5-4.0% p.a.

Differentiates by minimising volatility at the portfolio level, not at stock level

Managed by one of the few expert quant teams based in Asia

* Please visit www.eastspring.com.hk to view the disclosures on the distribution payout. Distributions are not guaranteed and may be paid out of distributed income, capital or both.

Investment approach

Our key differentiator is that we look at a broad universe of stocks rather than focus on stocks with low volatility qualities. Our process thus achieves a well-diversified and low volatility portfolio, not a portfolio of low volatility stocks.

Start with a broad universe

Filter the broad universe of listed equities for investability using minimum market cap and daily liquidity thresholds.

Conduct robust filtering

Exclude stocks with poor fundamental qualities such as valuation, momentum, quality etc. that are likely to underperform in the near term.

Optimise for volatility

Optimise the portfolio for low volatility within sector and country constraints to produce a well-diversified portfolio.

Perform daily monitoring

Monitor the portfolio daily and conduct rebalancing monthly or as and when needed while taking transaction costs into account.

Start with a broad universe

Filter the broad universe of listed equities for investability using minimum market cap and daily liquidity thresholds.

Conduct robust filtering

Exclude stocks with poor fundamental characteristics such as valuation, momentum, quality etc. that are likely to underperform in the near term.

Optimise for volatility

Optimise the portfolio for low volatility, within sector and country constraints to produce a well diversified portfolio.

Perform daily monitoring

Monitor the portfolio daily and conduct rebalancing monthly or as and when needed while taking transaction costs into account.

Interview with Eastspring's Quantitative Team

Find out how our Quantitative Strategies team leverages technology and data to identify and exploit market inefficiencies caused by market volatility and behavioural biases.