Morningstar recently announced the winners for the 2023 Morningstar Fund Awards – Malaysia. Of the five awards given out, KAF Investment Funds Berhad won two.

Congratulations to KAF Investment for winning the Best Asia-Pacific Equity award with KAF Jade Fund, and Best Malaysia Large-Cap Equity Fund with their KAF Core Income Fund.

Smart Investor had the opportunity to interview Chue Kwok Yan, Chief Executive Officer cum Chief Investment Officer, KAF Investment, to learn more about their winning funds.

Smart Investor: Congratulations on winning the Morningstar Award! Can you share with us what the recipe for your success is?

Chue Kwok Yan: This is a very difficult question indeed, as there are so many critical ingredients required to win such a coveted award that it is difficult to describe in such a short space. At the most basic level though, we believe that the building block is our people. We have successfully assembled a group of very talented individuals who share the same vision and work ethics that operate seamlessly in a close-knit team.

The huge diversity of background in our team is also by design where each member is able to contribute different viewpoints that is useful in navigating the drastically different investing circumstances over the past few years. Collectively, these allow us to formulate the right strategies for each unique circumstance.

SI: What are the strategies that you used in 2022? How was the fund positioned to mitigate risks and optimise opportunities?

CKY: Even after having managed money over the extreme market conditions of the past few years would not have prepared portfolio managers for 2022. The simultaneous fall in asset prices made our job very difficult especially for long-only funds. Previous approaches were untenable, and we had to start from a clean slate.

The breakthrough came when we accepted the correlation in asset prices on the downside. We mitigated risk by decisively cutting high valuation stocks to a minimum and hid in value stocks. This helped us weather the downshift for most of the year while we were able to take positions from a bottom-up stock selection basis towards the 2H of 2022 that fortunately worked well for us.

SI: 2022 was a bad year for most investments; how has this affected your investment strategies for both the short- and long-term?

CKY: It is not just the bad year for investments in 2022 but the series of extraordinary events over the past few years that has made a lasting impression on us. In a sense it solidifies our approach that focuses on our core competency. It taught us there is no ‘one size fits all’ hence the need to discard biases and remain adept in facing every circumstance that is different.

We will need to evaluate every situation by its merit and formulate suitable approaches and strategies in our investment decision making process.

SI: The recession is expected to hit us this year. What are your plans and strategies for 2023? Is there anything you plan to do differently?

CKY: Investment is a perennial process and hence 2023 is really a continuous window for making the most appropriate decision for maximizing returns while minimizing risks. In this sense, recession is just a blip in the investment journey requiring more focus on managing risk. We are fortunate that 2023 has started well for us with our funds posting relatively strong gains thus far.

Therefore, this gives us better flexibility in our strategies, allowing us to be more selective in our stock picks on higher conviction calls rather than constantly trying to catch up in performance by moving down the riskiness scale. We will dig deep into our core competency, as always, and focus on our competitive advantage in managing our esteemed clients’ money.

SI: With high inflation and interest rates, what’s your advice for retail investors?

CKY: The current episode of high inflationary pressure has laid bare a key shortfall in retirement planning and driven home the key message in pension weakness. Prior to this, each productive working individual is already facing inadequate pension due to longer life expectancy.

Compounding the effect is high inflation that erodes the real value of retirement funds with each Ringgit having lower purchasing power ability. In order to counter these effects, each working person would need to either work longer by retiring later or save more. Unfortunately, not everyone has the choice of the former with the statutory retirement age of 60 in Malaysia while not everyone has the luxury to save more.

As such, we advise all investors to make their retirement fund sweat for better returns that at the minimum compensates for inflation. Hence choose a fund base on knowledge of the Portfolio Manager who is managing it and stay invested all the time!

Morningstar recently announced the winners for the 2023 Morningstar Fund Awards – Malaysia. Of the five awards, AmanahRaya Investment Management Sdn Bhd won two.

Congratulations to AmanahRaya Investment for winning the Best Malaysia Bond Fund award with the AmanahRaya Unit Trust Fund (ARUTF), and Best Malaysia Bond (Shariah) Fund with the AmanahRaya Syariah Trust Fund (ARSTF).

Smart Investor had the opportunity to interview Mohamad Shafik Bin Badaruddin, Managing Director / Chief Executive Officer, AmanahRaya Investment to learn more about their winning funds.

Smart Investor: Congratulations on winning the Morningstar Award! Can you share with us what the recipe for your success is?

Mohamad Shafik: Thank you. Our accomplishment is due to a combination of factors. Our recipe is founded on a disciplined approach to managing investments, stringent credit checks, strict risk management, and a focus on giving our investors strong and consistent returns. In addition, we prioritise establishing long-term relationships with our clients by providing them with clear, as well as timely communication.

Our team of seasoned investment professionals works closely to identify opportunities in the market and manage risk in a controlled manner. As we navigate the market, we constantly learn and adapt to the changes in the market and the economy, which we believe will enable us to stay ahead of the ‘game’.

 SI: What are the strategies that you used in 2022? How was the fund positioned to mitigate risks and optimise opportunities?

MS: Our strategies for 2022 involved a focus on high-quality investments and a cautious approach to risk management. We positioned the fund defensively, with a bias towards shorter duration and higher credit quality bonds. However, we remain invested for most parts of the year and tried to play with allocation and diversification strategies as opposed to timing the market.

We were highly focused on building resilient portfolios that could withstand volatility and unexpected events, by diversifying across ratings, issuers and sectors. Overall, our approach was designed to balance risk and return, and to deliver consistent performance over the long term. 

SI: 2022 was a bad year for most investments; how has this affected your investment strategies for both the short- and long-term?

MS: The macro landscape in 2022 was not very supportive of fixed-income investing, especially when central banks began to turn hawkish and tighten liquidity condition. The challenging landscape had reinforced the importance of having a strong investment discipline. While we did some adjustments to our investment strategies in response to changing market dynamics and conditions, our overall approach remained consistent with what we have been practising all these years.

In short, the prevailing market condition did not affect or change the way we do things at ARIM. The key is to have a plan upfront. Something along the line of – if the market does this, we do this, if otherwise, then we do this. After refining our strategies and listing down all the actionable ideas and probable outcomes, before executing, we always ask ourselves the question “what could go wrong”, just so to be aware of the risks to our strategies.

 SI: The recession is expected to hit us this year. What are your plans and strategies for 2023? Is there anything you plan to do differently?

MS: We are monitoring the market and economic condition very closely. Having said this, we are in an ever ready state to change direction of our strategy if need be. If a recession happens – now that is a big ‘IF’, general we would expect bond prices to fall during a recession. Also, shorter tenure bonds would look more attractive compared with longer tenured ones.

In our view, the market is already discounting a mild recession in the U.S., Europe, as well as the UK, for 2023. As of now, it looks like central banks appear to be in control to engineer a soft landing with inflation slowing meaningfully by the end of 2023. 

Given the scenario, we would maintain our current portfolio duration for the first half and revisit them with the view to possibly extend the duration slightly in the second half. 

SI: With high inflation and interest rates, what’s your message for retail investors?

MS: Our message to retail investors is to keep invested, during good or bad times, and avoid market timing. While we are not against timing the market, doing it consistently is something that is very difficult to achieve based on industry experience in general.

It is also important for investors to work with financial advisors or unit trust agents who are able to advise them on how to asset allocate their monies into a diversified portfolio. Building a well-diversified portfolio across multiple asset classes is key to building wealth in the long run.

Morningstar recently announced the winners for the 2023 Morningstar Fund Awards – Malaysia and PMB Investment Berhad emerged as one of the winners.

Congratulations to PMB Investment for winning the Best Malaysia Large-Cap Equity (Shariah) Fund award with their  PMB Shariah Tactical Fund.

Smart Investor had the opportunity to interview Mahani Ibrahim, CEO of PMB Investment Berhad, to learn more about their winning funds.

Smart Investor: Congratulations on winning the Morningstar Award! Can you share with us what the recipe for your success is?

Mahani Ibrahim: The equity market’s performance last year was put under pressure by a combination of factors, such as rising inflation, interest rate hikes, the prospects of slower global growth, fears of a US recession, the Russia & Ukraine war, geopolitical events, supply chain disruptions and China’s zero-Covid policy. 

In line with the market condition, the fund manager maintained the equities position around 70% to 82%. The fund manager was cautious about the equity market. The fund manager also adopted a trading strategy stance.

Last year, we focussed on non-traditional and essential businesses, export-oriented companies and ESG themes. Due to this approach, some of the stock selections contributed handsomely to the portfolios under our management.

SI: What are the strategies that you used in 2022? How was the fund positioned to mitigate risks and optimise opportunities?

MI: Last year’s asset allocation had a fair combination of core, dividend, growth and trading play. There was no significant re-balancing exercise as we practically held to our core and dividend stocks as we believed the companies had a potential upside. 

However, the FM cut losses on some non-profitable stocks and replaced them with other companies we evaluated to have good potential. The fund manager maintained the cash level around 18% to 30%.

SI: 2022 was a bad year for most investments; how has this affected your investment strategies for both the short- and long-term?

MI: Throughout these challenging years, we emphasised stock picking to achieve outperformance. Besides, we used the “Buy on Weakness” approach if the market went down to a certain level and applied temporary defensive measures during adverse periods. We are more comfortable to raise cash and we are comfortable to be underperforming our peers and benchmark on short-term basis.

As our focus is our long-term performance, it is only natural that our performance to sway in the short-term basis due to the volatility. 

SI: The recession is expected to hit us this year. What are your plans and strategies for 2023? Is there anything you plan to do differently?

MI: At the moment, we plan to stick to our approach as stated in Q3. However, we will be flexible on our strategy depending on the market and economic situation. Currently, we are focusing on defensive such as the consumer staples and quality yield play, energy (due to underinvestment in the recent years following the collapse of oil price), ESG themes and small and medium size companies with potential growth.

SI: With high inflation and interest rates, what’s your advice for retail investors?

MI: They should focus on the long-term value of their portfolio and avoid making poorly timed asset sales. Besides, they must be ready to withstand the short-term volatility of the equity market.

KUALA LUMPUR, 16 March 2023 — Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today announced the winners for the 2023 Morningstar Fund Awards – Malaysia. The awards recognise those funds and asset managers that have served investors well over the long term and which Morningstar’s manager research team believes will be able to deliver strong risk-adjusted returns in the longer term.

The annual Morningstar Fund Awards recognise the retail funds and fund groups that added the most value for investors within key sectors and across asset classes. Morningstar selects the winners using a quantitative methodology, and eligible funds require a five-year performance track record. Weightings to one-, three-, and five-year performance are factored into the methodology, along with a qualitative overlay.

“The Morningstar Fund Awards commends funds and asset managers that served investors well by delivering top notch risk-adjusted performance for investors in 2022 and over longer time periods. Morningstar’s manager research team have used Morningstar’s extensive datasets and quantitative methodology to determine the winners across equity and fixed income categories, as the leading funds within Malaysia for investors,” said Wing Chan, Head of manager research, Europe and Asia Pacific, Morningstar.  

The 2023 Morningstar Fund Award – Malaysia winners are:

Methodology

The Morningstar fund category and fund house awards are based on Morningstar fund data as of 31 December 2022. The awards methodology emphasises the one-year period, but funds must also have delivered strong three-year returns after adjusting for risk within the award peer groups in order to obtain an award. In selecting winners, fund returns are adjusted for risk using the Morningstar Risk, a measure which imposes a higher penalty for downside variation in a fund’s return than it does for upside volatility.

The full methodology for the awards is available here.

About Morningstar

Morningstar, Inc. is a leading provider of independent investment insights in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers and owners, retirement plan providers and sponsors, and institutional investors in the debt and private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $246 billion in assets under advisement and management as of Dec. 31, 2022. The Company operates through wholly- or majority-owned subsidiaries in 32 countries. For more information, visit www.morningstar.com/company. Follow Morningstar on Twitter @MorningstarInc.