RHB Asset Management dominates Bond MYR (Provident) space

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

There is increased momentum for bonds to perform well in 2023 as we expect a smaller scale of interest rate hikes this year, compared with the unprecedented scale we saw in 2022 globally.” > Chang

RHB Asset Management Sdn Bhd (RHBAM) swept the awards for Best Bond MYR in the three-, five- and 10-year categories in the Provident universe. Chief investment officer Michael Chang attributes its success to the firm’s structured investment management process.

“RHBAM’s investment philosophy is to deliver consistent and sustainable risk-adjusted returns to our customers. It is based on a structured investment process, supported by in-depth research capabilities,” he says.

“We take a balanced approach, combining top-down and bottom-up analysis, focusing on factors that combine qualitative, quantitative and technical merits of an investment.”

Other key contributing factors to the firm’s win are the combined credit selection and bond market acumen in tackling extremely volatile business environments, such as during last year.

To Chang, the key challenges last year were none other than the rapid interest rate hikes and fast-rising inflation worldwide. As a result, bond prices fell, hurting the performance of funds in this asset class across the board.

However, he and his team stuck it out and emerged as one of the winners in this space. “We persevered as the bond market was oversold for several months last year. We did that by delving into pockets of opportunities when the market rebounded towards the end of last year.

“Additionally, we did rigorous analysis across the MYR bond universe to determine the risk and reward in either going further out on duration, or further down the credit curve in search of additional alpha to the portfolio.”

Chang and his team read the market right and were well prepared to navigate it over the longer term. They made some good calls, too.

“We believed the rate hikes would begin to slow following the record pace of increases in interest rates globally and locally. We were well prepared to navigate the market and anticipated the eventual rebound of the bond market,” says Chang.

“Our tactical approach was also to accumulate selected undervalued bonds through strategies executed in the primary and secondary markets. The right timing to execute these investment decisions played a key role in enabling the portfolio to outperform.”

Additionally, he and his team actively monitored the market for opportunities, placed more emphasis on staying nimble and ensured the firm had additional liquidity in steering through the volatility last year.

Moving forward, Chang remains positive on the bond market, with more investment opportunities emerging in government and corporate bonds. He advocates that investors increase the allocation to their bond portfolio when further selling activities take place. He says bond yields are expected to trend lower on the back of modest growth expectation in 2023.

“There is increased momentum for bonds to perform well in 2023 as we expect a smaller scale of interest rate hikes this year, compared with the unprecedented scale we saw in 2022 globally,” says Chang.

“Additionally, bond investment has its advantages with its ability to be traded on the secondary market, unlike fixed deposits that can only be redeemed at maturity. Interest rate expectations are also better expressed in bonds via the appreciation of its value, something that is not inherent in fixed deposit investments.”

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