Best Malaysia Bond Fund: Winner

Fixed income manager at AmanahRaya Investment Management that won Best Malaysia Bond Fund award tells us the tactics to navigate the rate hike environment. 

Morningstar 12.04.2022
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The 2022 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 Unit Trust Fund, managed by Ivan Von Siong Koo. In 2021, the fund returned 2.49%, compared with the Morningstar Category average of -0.15%.

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

How was the portfolio positioned to navigate the market volatility in 2021? Were there any particular holding(s) or theme(s) that drove the fund’s performance for the year?

We know investors want a reasonable return on their investment portfolio, which is challenging during the current low-interest-rate environment. In addition, the lack of new issuances in the PDS pipeline with ample excess liquidity in the financial market further depresses the market yield. Therefore, ARIM actively sources undervalued sukuks in the primary and secondary markets to help drive the fund’s performance in 2021.

Against the backdrop of the (i) ongoing pandemic, (ii) talks of rising interest rates, and (iii) geopolitical tensions, what is your outlook for 2022, and how are you expressing these views in your funds?

We foresee interest rates will be raised in the next 12-months, hence we position our portfolio with a shorter duration and keep a minimum cash level of about 5-10%.  To maximize portfolio return, our asset allocation remains tilted to fixed income instruments with more than 90% invested in quality corporate bonds. We do our best to balance the risk and return because bonds with comparatively large credit spreads have less sensitivity to interest rate changes than bonds with smaller credit spreads.

What are the top risk factors that could impact your portfolio, and how are you positioned to mitigate these potential risks?

Credit Risk. To mitigate this risk, we have relied on our strength in credit analysis, which generally focuses on the 5Cs of credit, such as character, capacity, capital, collateral, and conditions.

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?

At ARIM, we believe in a flat investment structure in order to have swift decision makings in response to changes in the market. Therefore, the whole Fixed Income team and credit teams report directly to the CIO who in turn to the CEO. In line, with the growth in our assets under management from RM 6.2 billion in 2019 to RM 8.4 bil currently, we have plans to add new members, especially in credit analysis to strengthen the Fixed Income team.

With the increasing awareness and demand for ESG investing, how have you been incorporating ESG considerations into your investment process?

ARIM is a great believer in ESG and responsible investing. ARIM already has an ESG framework continuous refinements will be made from time to time. At the same time, we are planning to increase our Sukuk holdings of highly-rated ESG issuers.

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