Where to put your money? Here are three equity funds you shouldn’t overlook in 2024.

• As investors look to position their portfolios in the new year, we shine the spotlight on three equity funds that we think stand out for their immense potential.

• Consider the Fidelity Global Technology A-ACC-USD to ride on the ongoing recovery and tap into the long-term potential of the technology sector. It focuses on uncovering opportunities whose longer-term outlook are far more promising than what current prices indicate.

• We also like the Eastspring Investments – Japan Dynamic AS SGD, a value-oriented fund. In the current environment of elevated inflation in Japan and higher Japanese government bond (JGB) yields, value as a style should continue to perform well.

• With oil prices remaining higher-for-longer, investors may wish to consider the BlackRock Natural Resources Fund A2 USD. The fund holds a concentrated portfolio as the investment team believes this offers the potential for higher returns and allows for a focused approach.

The much-feared full-blown recession that loomed over 2023 has failed to materialise. The US economy has proven resilient amidst significantly higher interest rates, only experiencing what is coined as a “rolling recession” that has now transformed into a “rolling recovery”.

Heading into 2024, the anticipated pick up in global corporate earnings has underpinned our decision to adopt a more positive stance on equities. As investors look to position their portfolios in the new year, we shine the spotlight on three equity funds that we think stand out for their immense potential.

1.     Fidelity Global Technology A-ACC-USD

Tap into the long-term potential of the technology sector

Our top sectoral picks going into 2024 are the digital economy and semiconductors.

A recovery is underway in Big Tech companies’ enterprise software and digital ads businesses, driven by the rising influence of generative artificial intelligence (AI). Margins are also improving after an increased emphasis on cost-saving measures. Similarly, monthly semiconductors sales have rebounded as the oversupply gradually dissipates, while demand strengthens thanks to the rapid adoption of AI. We anticipate semiconductor sales growth reaching as high as 40% by 2Q25.

Furthermore, unlike some past trends that generated more hype than anything, AI is proving to that it is here to stay with practical and tangible solutions. As the AI trend reshapes the world, Big Tech and semiconductor companies will emerge as key beneficiaries.

Related articles:

The earnings recession is over. Big Tech is set to lead the next phase of growth.

Chip sales to top 40% year-on-year by 2Q25. Here’s how you can capitalise on this opportunity

Our recommended fund for the global technology sector is the Fidelity Global Technology A-ACC-USD. The fund invests in companies that develop or will develop products, process or services providing or benefitting from technological advances or improvements. In particular, it focuses on uncovering mispriced opportunities whose longer-term outlook are far more promising than what current prices suggest.

The fund’s portfolio comprises of 101 holdings as of 30 November 2023. The top 10 positions are mostly mega caps, including global internet and semiconductor companies like Microsoft, TSMC, Amazon, and Alphabet (Table 1). These companies are known for their strong competitive advantages, sheer market dominance, and robust cash flow generating ability.

It is worth noting that the fund is benchmarked against the MSCI AC World Information Technology Index, which leaves out Big Tech companies like Amazon and Alphabet due to their classifications under consumer discretionary and communication services respectively, based on the Global Industry Classification Standard (GICS).

Table 1: Top 10 positions of Fidelity Global Technology

Company	Sector	Fund	Index
Microsoft Corp	Information Technology	5.1%	18.1%
Apple Inc	Information Technology	4.5%	20.2%
TSMC	Information Technology	4.0%	3.1%
Ericsson	Information Technology	3.1%	0.1%
Qualcomm Inc	Information Technology	3.1%	1.0%
Amazon.com Inc	Consumer Discretionary	3.0%	0.0%
Alphabet Inc	Communication Services	2.9%	0.0%
Samsung Electronics	Information Technology	2.8%	2.1%
SAP SE	Information Technology	2.7%	1.1%
Fidelity National Information Services Inc	Financials	2.6%	0.0%
Total		33.8%	45.7%
Index = MSCI AC World Information Technology Source: Fidelity International Data as of 30 November 2023

Over a five-year period, the fund has delivered stronger returns and experienced lower drawdowns compared to its peers including the likes of BlackRock World Technology Fund and FTIF – Franklin Technology. Although it has marginally underperformed the benchmark, the fund remains as one of the best options for investors seeking an active investment strategy on our platform.

Figure 1: Fidelity Global Technology has performed well in the last five years

Table 2: Return and risk comparison for Fidelity Global Technology

	5Y Annualised Return	5Y Maximum Drawdown
Fidelity Global Technology	18.7%	-39.1%
Peer Average	14.4%	-47.4%
MSCI AC World Information Technology Index	19.9%	-36.6%
Returns measured in SGD Source: Bloomberg Finance L.P., iFAST Compilations Data as of 30 November 2023

2.     Eastspring Investments – Japan Dynamic AS SGD

Structural changes to aid Japan in reclaiming its lost decades of performance

Geographically, we like Japan. We see a new narrative unfolding for the Japanese equity market, bidding farewell to the era of underwhelming returns particularly experienced during the “lost decades” – a period marked by prolonged economic stagnation and deflation since the 1990s.

In our view, there is a solid long-term investment case for Japan. This is driven by various factors such as the ongoing shift towards inflation, corporate governance reforms, and the resurgence as a semiconductor powerhouse. In addition, renewed interest from both domestic and foreign investors would drive capital flows, propelling share prices to new heights. We anticipate that these positive dynamics will outweigh the impact of a strengthening Japanese yen (JPY) on corporations.

Related articles:

The resurgence of Japan: A new era of multi-year tailwinds with upside potential of 30% by 2025

Japanese Yen will be one of the top performing currencies in 2024

We maintain an optimistic outlook on Japanese equities and recommend an unhedged share class to retain exposure to the JPY. Investors may find the Eastspring Investments – Japan Dynamic AS SGD a compelling option. This value-oriented fund screens investment ideas that are attractive on an absolute and relative basis, using criteria such as PE ratio, PB ratio, dividend yield, long-term price performance, and earnings revision. In the current environment of elevated inflation in Japan and higher Japanese government bond (JGB) yields, value as a style should continue to perform well.

As of 30 November 2023, the fund holds 40 stocks. Due to its fundamental bottom-up stock selection, the top 10 holdings significantly differ from the fund’s benchmark, MSCI Japan Index (Table 1). Notably, they largely comprise of companies within the automotive and financials space. The investment team holds the view that many auto companies are restructuring their businesses to become leaner and profit-focused, which hasn’t been fully priced in by the market yet. Meanwhile, financials are anticipated to benefit as the Bank of Japan (BOJ) gradually shifts away from years of ultra-loose monetary policy.

Table 3: Top 10 positions of Eastspring Investments – Japan Dynamic

Company	Sector	Fund	Index
Panasonic Holdings	Consumer Discretionary	5.9%	0.7%
Daito Trust Construction	Real Estate	5.6%	0.2%
Ricoh	Information Technology	5.5%	0.1%
Takeda Pharmaceutical	Health Care	5.5%	1.3%
East Japan Railway Company	Industrials	4.8%	0.5%
Honda Motor	Consumer Discretionary	4.4%	1.3%
Sumitomo Mitsui Financial Group	Financials	4.3%	1.8%
Nissan Motor	Consumer Discretionary	3.5%	0.3%
Nomura Holdings	Financials	3.1%	0.4%
Sumitomo Chemical	Materials	3.0%	0.1%
Total		45.6%	6.7%
Index = MSCI Japan Source: Eastspring Investments, iFAST Compilations Data as of 30 November 2023

Over a five-year period, the fund has generally delivered stronger returns compared to its benchmark as well as peers including funds like Fidelity Sustainable Japan Equity and JPMorgan Funds – Japan Equity. This was especially helped by a substantial outperformance over the past year from Japanese value equities held by the fund. We also note that the fund has a low turnover ratio of 19.34% (as of 30 June 2023), suggesting that the investment team believes in the potential for the underlying securities to perform well over time.

Figure 2: Eastspring Investments – Japan Dynamic has delivered superior returns in the recent year

Table 4: Return and risk comparison for Eastspring Investments – Japan Dynamic

	5Y Annualised Return	5Y Maximum Drawdown
Eastspring Investments – Japan Dynamic	5.6%	-36.3%
Peer Average	2.6%	-38.1%
MSCI Japan Index	4.4%	-32.8%
Returns measured in SGD Source: Bloomberg Finance L.P., iFAST Compilations Data as of 30 November 2023

3.     BlackRock Natural Resources A2 USD

Protect your portfolio against inflation

Commodities have historically helped provide inflation protection within portfolios. Today, while inflationary pressures are easing, we expect it to remain persistent particularly on the back of a strong US economy. Besides, inflation is never a linear downward trend; it is characterised by waves with several peaks and troughs. In fact, we believe spikes in oil prices could usher in the next inflationary wave.

As the oil and gas industry grapples with years of structural underinvestment, supply is struggling to keep pace with demand. Meanwhile, OPEC+ has been actively managing oil prices through production cuts. We expect oil supply to remain tight due to continued production capex discipline and ongoing efforts by OPEC+ to support oil prices. In addition, oil price volatility is likely to be high due to rising geopolitical tensions around the world.

Related articles:

Energy turbulence amidst the Israel-Hamas war

2% inflation is unlikely! Here’s how to position for a higher for longer new normal.

With oil prices remaining higher-for-longer, investors may wish to consider the BlackRock Natural Resources A2 USD. The fund offers exposure to companies whose predominant economic activity is in the natural resources sector, such as, but not limited to, companies engaged in mining, energy, and agriculture. Currently, energy remains the largest sub-sector of the fund (Figure 3).

Figure 3: Energy is the largest sector

The investment team seeks to generate ‘alpha’ by combining top-down research with bottom-up analysis of companies. They integrate quality factors such as assets (e.g. high margin, barriers to entry), management (e.g. a proven track record of delivering value to shareholders), capital structure (e.g. strong financials and debt coverage), capital allocation (e.g. a sensible approach to allocation between investment and dividend growth) and ESG considerations.

As of 30 November 2023, the fund has 44 holdings. Relative to its benchmark S&P Global Natural Resources Index, the fund holds a more concentrated portfolio as the investment team believes this offers the potential for higher returns and allows for a focused approach. Among the top 10 holdings are some of the largest integrated energy companies like Shell, Exxon, Total Energies, and BP (Table 5). Following capital discipline in recent years, energy companies now tend to exhibit stronger balance sheets. Higher oil prices have also contributed to robust free cash flow generation.

Table 5: Top 10 positions of BlackRock Natural Resources

Company	Sector	Fund	Index
Shell plc	Energy	8.1%	4.9%
TotalEnergies SE	Energy	5.7%	3.9%
Exxon Mobil Corp	Energy	5.3%	4.0%
Glencore plc	Materials	4.5%	2.8%
BP plc	Energy	4.3%	2.6%
Vale SA	Materials	4.2%	2.4%
BHP Group	Materials	4.2%	5.1%
Wheaton Precious Metals Corp	Materials	4.1%	1.0%
CF Industries Holdings Inc	Materials	3.4%	0.8%
Chevron Corp	Energy	3.3%	2.5%
Total		47.1%	30.0%
Index = S&P Global Natural Resources Source: BlackRock, iFAST Compilations Data as of 30 November 2023

Over a five-year period, the fund has outperformed both its benchmark and peers (e.g. JPMorgan Funds – Global Natural Resources etc). Its risk management is also decent, with a significantly lower drawdown compared to peers and one that is comparable to the benchmark (Table 6).

Figure 4: BlackRock Natural Resources has performed well in the last five years

Table 6: Return and risk comparison for BlackRock Natural Resources

	5Y Annualised Return	5Y Maximum Drawdown
BlackRock Natural Resources	9.5%	-45.1%
Peer Average	8.5%	-53.1%
S&P Global Natural Resources Index	8.6%	-44.7%
Returns measured in SGD Source: Bloomberg Finance L.P., iFAST Compilations Data as of 30 November 2023

Final thoughts

Against the evolving macroeconomic backdrop, it is important for investors to pick the winners. This is why we cast a spotlight on three equity funds that, in our view, not only distinguish themselves through their robust investment strategies and proven track record but also show immense potential. Moreover, the funds’ focus on quality should position them to thrive regardless of economic conditions.

Table 7: Summary of top picks

Market	Recommended Fund
Global Technology	Fidelity Global Technology A-ACC-USD
Japan	Eastspring Investments – Japan Dynamic AS SGD
Global Resources	BlackRock Natural Resources A2 USD