This article first appeared in Wealth, The Edge Malaysia Weekly on March 28, 2022 - April 3, 2022

AmanahRaya Investment Management Sdn Bhd (ARIM) broke its record by winning six awards at the Refinitiv Lipper Fund Awards 2022. AmanahRaya Syariah Trust won Best Bond MYR (Islamic) awards in the three-, five- and 10-year categories while AmanahRaya Unit Trust won the awards for Best Bond MYR (Malaysia) in the same categories.

The funds won these awards in the three- and five-year categories in the 2021 awards.

“We are extremely honoured to receive such prestigious awards, more so because last year was one of the toughest for bond funds since the Asian financial crisis. It was not an easy year to begin with, yet our discipline, perseverance and trust in the process helped us overcome the many challenges we had during the year,” says ARIM CEO Roszali Ramlee.

The macro landscape in 2021 was not supportive of fixed-income investing, especially when central banks began to turn hawkish. Amid the gradual reopening of economies, rising inflation led the central banks to change their strategy from promoting supportive policies to tightening liquidity conditions.

“In addition, there was an oversupply of credit paper in the market, diverting some of the liquidity from the secondary market. We navigated the market quite well last year. Reading into the changing macro narratives, we unloaded some government paper rather early, while only holding on to high-quality corporate credits,” says Roszali.

The firm was able to mitigate the downside through this strategy. Capital preservation was key to navigating the tough market conditions, he adds.

The funds’ rebalancing and asset allocation were mainly driven by the interest rate outlook. Their asset allocation remained overweight on sukuk, with more than 90% invested in quality corporate bonds. A minimum cash level of 5% to 10% was kept throughout the year.

“Given the consensus view that interest rates are likely to rise over the next 12 months, we shortened the portfolio duration by buying into shorter duration assets, which are less sensitive to interest rate hike risks,” says Roszali.

AmanahRaya Syariah Trust Fund aims to provide regular income and capital growth over the mid to long term through investments mainly in sukuk, Islamic money market instruments and trust accounts. AmanahRaya Unit Trust Fund has the same aim except that it invests in debt securities, money market instruments and trust accounts.

ARIM’s investment philosophy is based on the inefficient market hypothesis, says Roszali. Market inefficiencies create opportunities for investors when there is a mispricing of securities. The firm’s fund managers and credit analysts look out for undervalued securities to earn a return when the market price of these securities is closer to its intrinsic value.

ARIM will continue to trust its process and philosophy going forward while continuing to improve itself, says Roszali.

“We recognise how market dynamics have been changing quite rapidly these days. Some of these factor dynamics are shorter than others, such as the Covid-19 threat that is fading away as vaccination and immunity rates improve. Other factors, such as inflation, may stay longer and have a greater impact on our investments,” he adds.

Risks will never go away and can only be mitigated, says Roszali. The current geopolitical crisis, for instance, is a tail-risk event to many, but he believes that it too will pass. “Our message to investors is to keep invested, during good or bad times, and adjust your [asset] allocation [according] to your comfort levels and risk-return profile.”

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