Category Winner: Best Malaysia Bond Fund - Libra BondExtra Fund
Inception Date: 2002-10-08
Total Net Assets (Mil) (2018-03-30): USD 9.42
Manager: Elyzza Syazreen Zailan
M: Morningstar L: Libra
M: Can you highlight any major changes you made to the portfolio over the course of 2017? Were there any particular holding(s) that drove the fund’s performance for the year?
L: We continued to manage the portfolios actively and focused on liquid, high-grade bonds and Sukuk with strong credit and stable long-term cash flows. Given the flat interest rate outlook during the year, we maintained a neutral portfolio duration strategy. Towards year-end, we rebalanced the portfolio in anticipation that Bank Negara may normalise interest rates in 2018.
M: What is you outlook for 2018 specific to the market you cover, and how are you positioned to take advantage of opportunities and/or mitigate risks?
L: For 2018, Malaysia’s economic growth is projected to moderate from 5.9% in 2017 to 5.0-5.5%, while inflation is also expected to slow from 3.7% to 3.0-3.5%. Given expectations of softer domestic growth and inflation, there is no urgency for Bank Negara to embark on a monetary tightening cycle. Furthermore, domestic consumer spending may begin to moderate following the expiry of some of the consumer-spending stimulus measures implemented earlier, e.g. normalisation of employees’ monthly EPF contribution rate from 8% to 11%. Therefore the overall local interest rate outlook remains conducive for bond and Sukuk investments. For corporate bonds, market appetite may continue to be skewed towards liquid, AAA and AA-rated papers for their enhanced yield relative to lower yielding MGS. The lack of new primary issuances in the Malaysian corporate bond market, especially within the AAA and AA space, may continue to drive yields lower. We will continue to look for investment opportunities to enhance the funds’ returns, while continuously managing risk exposure.
M: Can you comment on the major risks facing financial markets, such as rising interest rates and elevated asset prices? How do these risk effect your investment decision?
L: Despite the recent improvement in US economic data, the Fed may continue to normalise interest rates gradually, as raising them too aggressively will increase borrowing costs for households and businesses at a time when US corporations and consumers have not fully recovered from the aftermath of the 2008 global financial crisis, thus hampering growth of the broad US economy as a whole. Nevertheless, as part of our investment strategy, we maintain sufficient liquidity in the funds and flexible duration strategy to allow us to respond quickly to changes in market environment and sentiment.
M: How is your investment team organized? Have there been any changes to the investment team or structure over the past year? Do you anticipate adding to the team in the near future?
L: Our fixed income fund managers are supported by a team of analysts. We do not anticipate any material changes to the structure at the moment. Nevertheless, we may look to expand the team in the future in tandem with the growth in our assets under management (AUM).
M: Can you highlight any areas where you feel that the investment team or the investment process can be improved upon?
L: There is always room for improvement as we continuously look for investment opportunities within the Malaysian bond market and global space as well.
View all Morningstar Malaysia Fund Awards 2018 articles here.