Category Winner: Best Malaysia Bond Fund - AmDynamic Bond
Inception Date: 2003-09-16
Total Net Assets (Mil) (2019-03-29): USD 26.51
Manager: Hock Khoon Kho, Yew Sun Fu
M: Morningstar A: AmInvest - Hock Khoon Kho and Yew Sun Fu - Portfolio Managers of AmDynamic Bond
M: Can you highlight any major changes you made to the portfolio over the course of 2018? Were there any particular holding(s) that drove the fund’s performance for the year?
A: For most part of 2018, the fund focused largely on income generation via higher yielding quality bonds with measured duration risk, in the face of the interest rate hike cycle in the United States (US). This defensive positioning shielded us from global volatility especially during Q42018. The portfolio was also helped by our tactical trading of US Treasury bonds, capitalising on market volatilities. The consistency of performance by AmDynamic# Bond fund throughout the years showcased our capability to deliver superior results to investors in different market cycles.
M: What is your outlook for 2019 specific to the markets you cover, and how are you positioned to take advantage of opportunities and/or mitigate potential risks?
A: In our view, 2019 will be a good year for bonds/sukuk based on 1) indication from the Federal Reserves (Fed) that the US rate hike cycle may come to a pause soon and 2) that the Fed can be flexible in reducing their quantitative easing measures.
While interest rate differential is still in favor of USD against major currencies, we view further strength of USD as being limited.
The positive outlook on emerging markets and prospects of Malaysian Ringgit recovery are key positives for Malaysian bonds/sukuk. The prospects for local corporate bonds/sukuk are enhanced by the lack of supply of new issuances, which is likely to lead to strong demand pushing bond/sukuk prices up and compressing the yield spread.
M: How have financial market risks, such as the ongoing trade war between the United States and China and tightening monetary policies in major economies, impacted your recent investment decisions? What are some underreported risks that could surface in 2019 or beyond?
A: We believe that monetary tightening has mostly reached its end for major economies as growth concerns and trade tensions take over policy makers’ attention. The Fed has signaled its willingness to hold interest rates and prolong the Quantitative Easing (QE) policy to support the economy, decisions which encouraged us to be more fully invested in the market.
Underreported risks include:
1. Slowing global economy in the face of high leverage level globally.
2. Re-escalation of US-China trade tensions.
3. Prospect of political upheavals in the US from potential impeachment of Trump.
4. Risk of another big correction as many of the positives have been factored into market valuation.
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?
K: We have an integrated investment team with an overall Chief Investment Officer (CIO) working closely with team heads from four key pillars, i.e., Conventional/Islamic equities, Conventional/Islamic fixed income, Research and Quantitative Strategies. We strive for close coordination between the teams to maximise synergies. We are always on the lookout to retain as well as to attract new talent into the team.
M: Where do you feel that the investment team or the investment process can be improved upon in the future?
K: There are always many aspects of the team or process that we can improve on. Key projects we are working on include synergising equity and credit research processes for consistency and cross-fertilisation of ideas. We are also working on incorporating the aspects of Environment, Social and Governance (ESG) into our investment process.
View all Morningstar Malaysia Fund Awards 2019 articles here.