CIMB-Principal's Fund Management Team, shed lights on topics such as their team structure, how various risks have affected their investment decisions, and the major portfolio changes over last year.
Category Winner: Best Asia-Pacific Equity Fund - CIMB-Principal Asia Pacific Dynamic Income Fund
Key Stats
Inception Date: 2011 Apr 25
Morningstar Rating (as of 2015-02-28): 
Total Net Assets (Mil, as of 2015-02-27): 492.05 USD
Manager: Management Team
Manager Start Date: 2011 Jun 30
M: Morningstar P: CIMB-Principal
M: Could you highlight any major changes you made to the portfolio over the course of 2014? Were there any particular holding that drove the fund’s performance for the year?
P: Since the financial crisis in 2008, the markets have remained challenging and volatile. Similarly, in 2014, there were many macro worries, such as the US interest rate hikes, earning downgrades and falling oil price. We have to stay true to our long term investment calls while coping with the short term market volatility.
Despite the market volatility, we have been fully invested throughout 2014. We have worked very hard and managed to find the right stocks to remain fully invested over this period. We have due respect for the markets and thus we stayed away from using cash allocation to beat the market consistently. Cash is a by-product of our bottom-up focused investment process.
Our investment approach is primarily based on bottom-up, stock selection. By doing simple things well, we channel our energy on picking the right investments for our funds. This bottom-up focus also allows us to develop unique insights and thought leadership in our top-down analysis and macro views.
From a portfolio construction perspective, our funds are managed to deliver benchmark, high alpha and absolute return profile. In other words,we do not spend time trying to lose less money on index stocks. We spend most of our time figuring out how to have portfolios that lose little money when we are wrong and make a lot of money when we are right.
M: What is your economic outlook for 2015 specific to the markets you cover and how are you positioned to take advantage of opportunities and/or mitigate potential risks?
P: In our view, 2015 is likely to be a year with slowing economic growth and falling inflation.
Given the sluggish outlook, we expect flattish return from local and global financial markets this year. We prefer international markets over local markets given the current structural challenges and currency weakness that the Malaysian economy faces.
We would continue to be cautious on value and cyclical stocks as there are over-capacity and over-leverage in many industries. Betting on a reversion to mean would not be a great idea in a world that is experiencing accelerated change.
M: Can you comment on the macro risks facing the global economy, including potential US rate hikes, QE programs in the Eurozone and Japan, and the growth headwinds facing the emerging world? How do these risks affect your investment decisions?
P: As the US labour numbers continue to improve, so do the concerns of the Federal Reserve (“Fed”) to begin normalising interest rates. We subscribe to the Fed to maintaining its policy rate this year on the back of an ever strengthening Dollar. The strong Dollar hurts multinational profits while importing disinflation in an already soft world market – as disinflation will impair corporate Capital Expenditure (“capex”), it may prematurely stifle the recovery from 2008.
Whether the Eurozone Quantitative Easing (“QE”) will transmit into higher inflation for the region remains to be determined. The availability of assets to be purchased coupled with European sovereigns that are already providing yields lower than the US makes the push for recovery uncertain.
Bank of Japan (“BOJ”) should maintain monetary-stimulus policies, but structural challenges facing its economy still need to be addressed.
China growth has weakened but growth forecast is still relatively impressive at 6-7% for the year. As the government reforms wend through the economy, we expect the People’s Bank of China (“PBOC”) to address economic imbalances while aiming for a soft landing; and minimising collateral shocks.
While global business-cycle-readings remain expansionary and corporate profits robust, we expect volatility swings to be more frequent and extreme.Given the uncertain market environment and heightened earnings risk, we stay risk averse and careful in our investment decisions. We maintain that bottom-up-stock-selection will be the key driver to performance in flat-markets.
M: How is your investment team organized? Have there been or do you anticipate any changes to the investment team or structure over the course of the year? Do you anticipate adding to the team in the near future?
P: Our investment team is organized along asset classes and country expertise, with a single focus to generate total returns for our clients, regardless of market conditions. From a "wall-less layout” between our fixed income and equity teams as well as closely knitted teamwork within our regional platform, we leverage on our talent to be early and ahead of the markets in our investment decisions.
For 2015, our priority remains to deliver consistent outperformance to our clients. We intend to further strengthen our investment process by sharpening our focus, adding the right resources and building on our culture of investment excellence.
M: Can you highlight any areas where you feel that the investment team or the investment process can be improved upon?
P: Our win could really be attributed to our excellent team work that is built on passion, focus and trust. Of course, there is definitely room to always challenge ourselves on these desirable traits for the team to be better every day. Certainly, we are working hard on driving consistency, focus and high alpha across all the products we manage for our clients.
