This article first appeared in Wealth, The Edge Malaysia Weekly on April 19, 2021 - April 25, 2021

AmFunds Management Bhd ­(AmInvest) emerged as a group winner at the Refinitiv Lipper Fund Awards 2021. In fact, the fund management firm, helmed by CEO Goh Wee Peng and chief investment officer (CIO) Wong Yew Joe, bettered its 2020 performance despite a year of Covid-19-enforced lockdowns.

AmInvest won in the Best Bond Group (Provident) category and took home a further six individual awards (an improvement on the one group and three individual awards from last year). The group’s improved performance came at a time when the economy and markets were rocked by the pandemic and the lockdowns.

According to Goh, while the pandemic was not the first crisis the firm had faced, this time around, AmInvest offices were empty and lacked the usual rush to study, formulate and implement strategies to manage the market volatility, with most of the team having to work from home. “While selling pressure was strong, the commitment of massive stimulus measures by governments around the world maintained some [degree] of stability in March 2020,” she says.

“Our general investment stance was already moderately defensive on the back of the bleak economic outlook in 2020. We were also mindful, however, that an overly pessimistic investment stance would risk our missing out on any swift market recovery.

“In addition to managing a more balanced risk exposure, we were closely monitoring the redemption patterns of the mutual funds, as we had expected the volatility to spur investors to redeem the investments.

“In hindsight, however, redemptions were more manageable than expected, which reflected investors’ sense that there was more value in the market after the initial selling pressure.”

For his part, Wong recounts that the early divergence in the economic data and market direction was a reflection that investors were eager to look beyond 2020, even though the immediate risks (global lockdowns and economic shutdowns) presented a bleak outlook.

Wong and his team had also anticipated support in the form of massive fiscal and monetary stimulus, which provided liquidity to the markets. “We viewed the selling pressure in most asset classes during the second quarter of 2020 to have substantially priced in the downside risk,” he explains.

At that point, it was a matter of looking for signs that the pandemic would eventually wear out — something that Wong admits took some faith on his part. But one year on, from the first Movement Control Order (MCO), Wong and his team have been vindicated.

Speaking on the firm’s overall fixed income performance, Wong says he and his team held fast to their convictions throughout 2020 and remained consistent in their approach to be selective on credit exposure.

“We engaged in active and tactical trading strategies based on prevailing market valuations and outlook to generate alpha,” he says. AmDynamic Bond picked up two individual awards in the three- and five-year returns categories for ringgit-denominated bonds.

Despite the selling pressure on bonds in 2Q2020, which spooked most bond fund managers, Wong and his team were committed to maintaining a high portfolio duration and took some material trading positions in long-tenure government bonds that boosted alpha returns throughout the year.

The two other funds — AmMalaysia Equity and AmDividend Income — won two individual awards each. “These funds benefited from active trading positions in rubber gloves, a sector winner from 2020. In addition, the portfolio stability was underpinned by a selection of dividend-yielding and less volatile stocks in the larger and mid-cap segments,” Wong says.

He attributes this year’s strong performance to the firm’s overarching investment philosophy. “We adopt a combination of top-down (macroeconomic views, trends and themes) and bottom-up (sector, stock and credit selection, and relative valuation) approaches. 

“With these views, we deployed high conviction structural and tactical strategies. For fixed income funds, the fund manager continuously adds value by actively managing duration and yield curve positions.” 

Looking ahead, Wong anticipates the broad economic recovery to be an anchor investment theme for this year. While the downside risk of delayed herd immunity is still in play, he is hopeful the vaccination drive will be successful.

“Newly elected US President Joe Biden also brings the expectation of a return to some predictability to the country’s international relationships. In any event, improvements are expected to be gradual.

“Our funds generally adopt concerted strategies, and we expect the equity markets to continue their recovery, while the bond market will still be supported by continued accommodative monetary policies until economic normalcy is achieved.”

Meanwhile, Goh says the pandemic highlighted the need for the investment community to be able to identify black swan events, although, to be fair, the precise timing of these events is almost impossible to determine. “What we need to do is keep a level head and maintain rationality when these events do strike,” she adds.

Like Wong, Goh is closely monitoring the country’s trajectory towards herd immunity and, to that end, cites the availability and efficacy of vaccines to be paramount. 

She says: “Looking at the pace of inoculation in many countries and the confidence in the vaccines’ efficacies based on test results, we are more confident of a global recovery in the latter part of 2021, and perhaps slightly later for our own local economy. 

“The biggest risks right now have to do with just how long the vaccines’ effectiveness will last, and the extent to which multiple inoculations will be necessary to achieve herd immunity.”

Meanwhile, Goh expects investors to continue to shift into riskier asset classes such as equities, in line with the economic recovery theme for this year. Global interest rate policies are expected to remain accommodative, and steep yield curves are likely to benefit the banking sector, she says. “We also think the technology sector, despite its rich valuations, will continue to show upside potential, especially those at the forefront of technology.”

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