Morningstar Awards 2012
Winner of MYR Bond Fund Category
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Morningstar: Could you highlight any major changes you made to the portfolio over the course of 2011? Were there any particular holding that drove the fund’s performance for the year?
KAF: The portfolio for 2011 was driven largely by a couple of shifts in duration through the year as developed market volatility encouraged a risk-on, risk-off strategy.
In terms of a sector call, fund performance was driven by Middle Eastern credits where we saw value in the stable entities which were trading at unfairly wide spreads and benefited as the numbers began to reflect stability to the credits. Examples were The National Bank of Abu Dhabi, Abu Dhabi Commercial Bank and the Gulf Investment Corporation.
In terms of the contribution of a particular holding, it would have been Sarawak Energy Berhad 2026, a long dated credit which appreciated by almost 7% in a period of just over one month.
Morningstar: What is your economic outlook for 2012 specific to the markets you cover and how are you positioned to take advantage of opportunities and/or mitigate potential risks?
KAF: We believe 2012 will be a year of low interest rates, narrow credit spreads and a flat yield curve, all of which represent anathemas to fixed income portfolios as any reversal of these trends would negatively impact valuations. In this scenario we would and have positioned our portfolios towards investment grade long duration non-financial assets which, although potentially exposed to MTM risk, provide strong coupon cashflows and possible upsides from trading opportunities during market supply shortages of investment assets.
Morningstar: Can you comment on the risks facing the global economy? How do these risks affect your investment decisions?
KAF: While the present global investment uncertainties negatively impacts many asset classes, Emerging Market debt has largely been a beneficiary of the volatility in the other parts of the world. As such, a sudden reversal of currency inflows and easy liquidity will would actually be the main investment risk for domestic fixed income portfolios. Our cognisance therefore would be focused on monitoring any unexpected and accelerated recovery in growth in the presently risky economies which could lead to a reversal of investment fund flows out of
Morningstar: Do you anticipate expanding the investment team in the near future?
KAF: Our investment team will continue to grow as the capacity of funds under management grows, as well as in order to further refine and develop our investment approach and processes.
Morningstar: Can you highlight any areas where you feel that the investment team can improve upon?
KAF: The investment team will most likely require further exposure and experience in regional and global credits, particularly for newly investible markets such as
