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

PMB Investment Bhd’s Dana Mutiara won the award for Best Equity Malaysia Income (Islamic) in the three-year category by generating a total return of 52.93% as at end-2021.

CEO Mahani Ibrahim attributes the win to the firm’s investment philosophy of seeking outperformance by identifying, evaluating and investing in undervalued stocks whose potential has yet to be realised by the market.

“In equity investment, we use both top-down and bottom-up approaches to arrive at our investment decisions. In terms of strategy, we place great emphasis on equity allocation so that our portfolio outperforms the benchmark index on an annual basis,” she says.

The firm also adopts and combines fundamental and technical analysis to arrive at its investment decisions. “We use fundamental analysis to select companies, or stock universe, and technical analysis for the entry and exit of stocks. As for the winning fund, we employ relative-strength analysis for stock selection as well.”

Market volatility was the biggest challenge last year due to the Covid-19 pandemic that has continued to rage globally. That prompted the government to impose another round of Full Movement Control Order in the middle of last year. Other factors that contributed to last year’s uncertainties included domestic political changes, a mixed and slower recovery among emerging-market economies and a less market-friendly Budget 2022.

“However, we managed to overcome the challenges by adopting a bottom-up approach to arrive at our investment decisions, assisted by the relative-strength technical analysis,” says Mahani.

A more frequent rebalancing of its portfolio last year also contributed to the fund’s outperformance. “As an equity fund, we allocated at least 70% of investors’ money to equities. We did more rebalancing exercises and traded more frequently last year on the back of a volatile market. Our cash balance varied throughout the different periods and was between 5% and 30% last year,” she says.

“The same investment strategy — which is more active — will continue to be employed this year, as we expect the stock market to remain volatile.”

Moving forward, Mahani expects the local market to record a positive performance and the FBM KLCI to end at about 1,650 points by the end of the year. The firm will maintain its investment strategy by using relative performance analysis and adopting an active investment management approach.

“As Dana Mutiara is classified as an equity fund, we will have at least 70% exposure to equities. The fund is currently focusing on the technology and industrial product sectors. We aim to generate a return of 10% this year,” she says.

However, investing in foreign markets is expected to be equally important this year. As at Feb 18, the FBM KLCI recorded a return of -5.3% in the past three years and was among the worst stock market performers globally.

“Local fund managers have to diversify their investments overseas markets to provide a reasonable return to unitholders, without neglecting the local market,” says Mahani.

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