Best Malaysia Bond (Shariah) Fund: Winner

The managers of the winning fund, AmanahRaya Syariah Trust Fund, discuss what worked in a tough year.

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The 2021 winners of the annual Morningstar Fund Awards–Malaysia have been announced.

The awards recognise the best of the Malaysian fund management profession, with winners selected by the Morningstar team.

The winning Shariah Bond Fund is AmanahRaya Syariah Trust Fund, managed by Ivan Von Siong Koo. In 2020, the fund returned 9.35%, compared with the Morningstar Category average of 4.69%

We spoke to the managers and asked them about their strategies. Here is an edited excerpt:

Question: How was the portfolio positioned to navigate the coronavirus-induced market volatility in 2020? Were there any holding(s) or theme(s) that drove the fund’s performance for the year?

Answer: We actively sourced undervalued sukuks (Islamic Bonds) in the secondary markets. As a fund manager, we strive to stay ahead of the curve and act ahead of market anticipation. For example, in 2020, we extended our portfolio’s duration prior to the multiple interest-rate cuts throughout the year. By doing this, we have increased our fund sensitivity and the prices of the longer-tenure bonds in our portfolio rise to a greater degree compared to shorter tenure bonds. This enabled the fund to declare dividends in 2020.

Question: Against the backdrop of the vaccine rollout, a new U.S. administration, and ongoing global monetary easing, what is your outlook for 2021, and how are you expressing these views in your portfolio?

Answer: For 2021, fixed-income investors should brace for lower returns than last year. We expect local interest rates to remain low in the next 12 months with volatility coming from foreign factors such as the performance of U.S. Treasury bonds. We view the market will likely undergo some recovery within the next 12 months with interest rates normalising, but full recovery may take slightly longer. On that note, we may reduce our portfolios’ durations, be slightly overweight in cash and short-term instruments.

Question: What are the top risk factors that could have an impact on your portfolio? How are you positioned to mitigate these potential risks?

Answer: Credit risk. In terms of addressing risks, we promote a strong credit culture that forms the foundation of our risk management. We view our credit team as our ‘first line of defence’ against weak credits and rely on good credit analysis to identify good issuances. In addition, the firm also implements and applies strict credit guidelines and policies to evaluate the sukuk’s programmes to mitigate the risk.

Question: How is your investment team organised? Have there been any changes to the investment team or structure over the past year? Do you anticipate adding to the team in the future?

Answer: In the past few years, the fixed-income team has consisted of six members, and the head of fixed income reports to chief investment officer. Given our AUM has grown more than 20% over the last year, we may consider acquiring some talent.

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