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

Public Mutual Bhd dominated the Refinitiv Lipper Fund Awards 2021, bagging three group and 31 individual awards — the greatest number of awards won by a fund management company — retaining its winning streak for three years running.

The fund house clinched the Best Equity Malaysia, Best Mixed Assets Malaysia and Best Mixed Assets Malaysia (Islamic) group awards, despite stormy market conditions and global economic volatility caused chiefly by the Covid-19 pandemic.

Its CEO Yeoh Kim Hong attributes the stellar performance to the funds’ holdings of fundamentally sound companies with positive long-term growth prospects that displayed resilience during the pandemic-led downturn.

The companies in their portfolios had subsequently staged a strong rebound in 2020, following buying interest in quality companies as sentiment improved, she says.

“The group award for an asset class is conferred on the fund house with the best overall ranking as derived from its eligible funds’ standings within their respective fund categories. Under the Best Equity (Malaysia) group award, Public Mutual had seven domestic and 13 foreign conventional equity funds evaluated across the categories of Equity — Malaysia, Asean, Asia-Pacific ex-Japan, Asia-Pacific and Global.

“Under the Best Mixed Assets (Malaysia) group award, we had four domestic funds and seven foreign funds evaluated against their peer funds, while we had three domestic funds and one regional fund evaluated for the Best Mixed Assets (Malaysia Islamic) group award.

“The performances of our funds in these three group categories were lifted by their investments in technology, e-commerce and healthcare stocks, which benefited from the accelerated adoption of digital solutions, owing to social distancing measures and increased demand for medical care and personal protective equipment amid the Covid-19 pandemic.”

The firm’s overarching philosophy of fundamental-based investing has ensured that their funds deliver consistent returns over the long term, Yeoh says.

This strategy saw to it that three of its funds — PB China Pacific Equity, Public Tactical Allocation and Public Islamic Asia Leaders — won Lipper fund awards for five consecutive years.

PB China Pacific Equity fund’s performance was underpinned by its holdings of selected China internet and Taiwan technology stocks that benefit from the long-term structural growth of the internet and e-commerce, 5G and data centre segments.

The Public Tactical Allocation fund was tactically positioned in selected US technology software and healthcare companies, which benefited from the country’s accommodative monetary and fiscal policies as well as the sectors’ long-term structural growth prospects.

The performance of the Public Islamic Asia Leaders fund, on the other hand, was underpinned by its focus on regional market leaders in the technology and e-commerce sectors, particularly investments in electric vehicle supply chains, which are capitalising on the increased focus on clean energy.

Other funds, such as the Public Ehsan Mixed Asset Conservative fund and the Public Islamic Asia Tactical Allocation fund, also benefited from holdings in the technology, healthcare and e-commerce sectors.

The pandemic has accelerated the adoption of technology solutions for both corporations and consumers to accommodate the movement restrictions and physical distancing measures globally.

As such, the firm rebalanced its equity investments accordingly into the domestic and foreign technology, e-commerce and internet sectors, which are poised to benefit from these structural changes, says Yeoh.

“In addition, our funds have increased exposure to selected healthcare stocks to capitalise on the increased demand for healthcare services, medical equipment and personal protective equipment such as rubber gloves. The technology and healthcare sectors outperformed strongly relative to the broader markets in the past year.

“As lockdown restrictions gradually eased and prospects for a recovery in economic activities improved amid positive news on Covid-19 vaccines in 4Q2020, our funds were subsequently repositioned into selected recovery plays in the financial, basic materials, industrial, services, leisure and consumer sectors, which were anticipated to benefit from the restarting of business activities and a rebound in consumer spending.”

These strategies enabled Public Mutual’s fund managers to navigate the challenging market conditions in 2020 and outperform their peers over the period.

On the fixed income front, the PB Islamic Bond fund won the 10-year award in the Bond MYR–Malaysia Islamic category with a return of 71.1% over the review period.

“The fund adopted a longer-duration portfolio to capitalise on falling bond yields in the first half of 2020. It also focused its investments on sukuk issued by the Malaysian government as well as infrastructure sukuk with sound credit fundamentals,” explains Yeoh.

The fund house’s balanced and mixed asset funds, which invest in a portfolio of both equities and bonds, exhibited lower volatility of returns compared with the equity funds, which are generally positioned in growth industries such as e-commerce, internet and technology.

“The performance of these funds was underpinned by contributions from their bond/sukuk portfolios, as yields were compressed in the first half of last year.

“Our bond funds, which are mainly invested in the Malaysian bond market, maintained a long portfolio duration for most of 2020 on expectations of interest rate cuts as central banks globally reduced policy rates to mitigate the adverse economic impact brought about by the Covid-19 pandemic. This allowed our funds to capitalise on the lower bond yields in 2020.

“The funds also focused their investments on bonds with sound credit fundamentals and resilient business models, which enabled us to avoid adverse credit events amid slowing global and domestic growth,” she says.

While there were opportunities aplenty, there were nerve-wracking challenges to contend with, Yeoh adds. “Our equity funds had to weather the sharp correction in the equity markets at the start of the pandemic as well as the subsequent periods of elevated volatility throughout the year.

“Nevertheless, by adhering to our fundamental investment approach of selecting stocks that have resilient earnings, strong financial positions and proven management records, our funds were able to navigate such challenging periods,” she says.

On the fixed income front, the most challenging situation faced by fund managers in 2020 was the uncertainties pertaining to the Covid-19 outbreak.

“Thus, our strategy was to avoid bond/sukuk issuers that could be adversely affected by the contraction in economic activities while seeking to preserve credit quality by focusing on issuers in sectors such as finance, telecommunications and utilities,” Yeoh explains.

In view of continued global policy responses as well as the progressive rollout of vaccinations worldwide, she says gradual recovery in the global economy and firmer financial markets are expected.

“Against this backdrop, we may revisit selected sectors and markets that are poised to benefit from the reopening of economic sectors and rebalance our equity exposure accordingly.”

The equity funds are expected to continue to focus on stocks that demonstrate long-term sustainable growth, as they will be better positioned to weather the ups and downs of the markets and provide consistent returns over the long term.

“Given the prospect of intermittent rises in global bond yields in 2021 as market participants gauge whether global economic growth and inflation could accelerate more quickly than anticipated this year, our bond funds will maintain a defensive positioning and focus on quality issuers at better pricing, while rebalancing on an ongoing basis to capitalise on opportunities arising from shifts in yield curves,” she says.

Considering the persisting volatility, Yeoh recommends that investors maintain a well-diversified portfolio consisting of domestic, regional and global equity funds as well as fixed income funds.

“It is crucial that investors adopt Ringgit Cost Averaging, which will help them remain disciplined in investing for their long-term financial goals and remove the emotional component when investing during market highs and lows.

“As the market goes through cycles and is subject to short-term volatility, investors are advised to hold their unit trust investments over the long-term period of five years or more to allow time for their investments to grow,” says Yeoh.

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