AllianceBernstein shares insights on low-volatility investment opportunities to manage post-COVID uncertainty

SINGAPORE-(BUSINESS WIRE)–In Singapore, as elsewhere, equity markets face increased uncertainty stemming from rising inflation, slowing growth, the prospect of higher interest rates and geopolitical tensions. Against this troubling changing backdrop, investors may be wondering how to manage the resulting volatility in their portfolios or whether they should continue to invest. Global investment management and research firm AllianceBernstein (AB) says getting out of a volatile market rather than staying in it could lead to worse outcomes for nervous investors.

AllianceBernstein’s approach to low-volatility investing targets companies with three key characteristics: quality, stability and price, 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 trade at attractive prices are a good way to deal with volatility.

“Investors may be tempted to rush for the exits in the face of short-term market pressure and wait for better times, but this can be a costly strategy in the long run.” Ultimately, they can sacrifice good returns by de-risking their portfolios too much, too quickly, then fail to reap the benefits during the subsequent recovery,” says Karen Lim, Managing Director, Southeast Asia Client Group. “Instead of pulling money out of the market, investors could take a low-volatility approach to build a resilient portfolio that can withstand a variety of market conditions—one that can reduce losses in market downturns while capturing the greater part of the rise in a bull market to provide a smoother return pattern.”

Greater sustainability in certain sectors

While most sectors were spared from the widespread market sell-off this year, some sectors proved less volatile than others. The broad technology sector, for example, was one of the most affected sectors. But some tech stocks have held up relatively well compared to previous declines, suggesting tech has taken hold and is indispensable today.

“The technology sector offers a wide range of opportunities. While some companies represent a strong bet for future growth, others offer predictable cash flow streams, making them inherently defensive,” adds Karen. “Highly profitable businesses with largely recurring revenue, particularly those with market or price leadership, or those that provide non-substitutable products, tend to offer risk mitigation in periods of volatility, unlike their non-profitable counterparts .”

Some healthcare and consumer companies also held firm despite the market turmoil. There will be winners and losers in each of these sectors, 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 whole-of-firm approach

ESG considerations are deeply embedded in AllianceBernstein’s investment decisions in the company’s active portfolios – and in the way it engages with portfolio company management and stakeholders. In addition to 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 centralizing ESG research, sharing information between offices and tracking engagement, AllianceBernstein hopes to drive better investment outcomes for its clients.

AllianceBernstein brought its expertise in global investment management to Singapore in 1993 and is committed to achieving better results through research, portfolio management, wealth management and client service. With 26 offices worldwide, investors can be reassured by the breadth and depth of investment opportunities with a strong history of meeting the needs of a diverse range of clients.

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