AmanahRaya Investment Management wins big in Bond MYR category

This article first appeared in Wealth, The Edge Malaysia Weekly on March 27, 2023 - April 2, 2023

The economic data that has come out so far supports the case that the overnight policy rate has peaked in 2023. As such, we continue to adopt a more flexible portfolio and duration strategy, which allows us to be prepared for any changes in market conditions.” > Shafik

AmanahRaya Investment Management Sdn Bhd (ARIM) emerged as a big winner in the Bond MYR category. AmanahRaya Unit Trust won Best Bond MYR (Malaysia) in the three- and five-year categories, while AmanahRaya

Syariah Trust won Best Bond MYR (Islamic) in the three-, five- and 10-year categories. Both funds won the Bond MYR awards for the third year in a row.

Managing director and CEO Mohamad Shafik Badaruddin attributes the firm’s win to its investment philosophy that is centred on the idea of inefficient market hypothesis, which means the mispricing of securities when there’s fear and greed in the market. Capable fund managers would buy stocks or bonds when they are oversold or sell them when they are overpriced.

“We take pride in our strong process that has allowed us to continuously seek undervalued good securities and churn out the desired returns for our investors,” he says.

The rising interest rate environment last year did not bode well for bonds. As rates rise, bond prices fall. “Not only the direction of the interest rates, the magnitude of the rise within such a short period posed huge challenges to active fund managers. Global inflation remained stubbornly high, hovering at a 40-year high in some parts of the world,” says Shafik.

What helped the firm navigate through the period was its stringent internal credit assessment process. It ensures a robust selection of quality issuances make their way into the firm’s portfolios.

Shafik and his team’s best decision last year was to remain fully invested in the bond market while shortening the duration of the portfolios.

“The lower portfolio duration allowed us to reduce interest rate risk and soften the negative price impact on our bonds. We also invested in fundamentally strong companies that were in the down cycle. Our prediction was that they would ride out the uncertainties and begin registering stronger numbers,” he says.

Shafik and his team did not make many changes to their asset allocation last year, partly because 90% of the allocation was in corporate bonds with strong credit quality. The remaining 10% was cash.

“However, we remained flexible in our portfolio and duration strategy given the high level of uncertainties and volatility in the market last year,” he says.

What about 2023? Shafik remains cautious on the back of slowing economic growth as the world enters the tail end of the interest rate hike cycle.

“The economic data that has come out so far supports the case that the overnight policy rate has peaked in 2023. As such, we continue to adopt a more flexible portfolio and duration strategy, which allows us to be prepared for any changes in market conditions,” he says.

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