Friday 23 Feb 2024
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This article first appeared in Wealth, The Edge Malaysia Weekly on March 28, 2022 - April 3, 2022

UOB Asset Management (M) Bhd once again landed a winning spot at the Refinitiv Lipper Fund Awards 2022, with two fund awards this year.

The firm’s United Asean Discovery Fund won the Best Equity Asean (Malaysia) award and the United Bond & Equity Strategic Trust Fund bagged the Best Mixed Asset MYR Balanced — Global (Malaysia) award in the three-year category.

CEO Lim Suet Ling attributes this success to the fund house’s bottom-up approach, focusing on fundamental analysis of businesses, which has helped it navigate volatile market conditions.

“In cases in which we have uncovered insights through our research, this would be expressed with high active shares in portfolios. Security selection has been a significant contributor to outperformance historically and was a key factor in the awards for the funds managed,” says Lim.

She says UOB Asset Management is style-agnostic in its investment strategies, which accords the team the flexibility to pick an optimal style to achieve its investment objectives.

The two wins did not come without challenges, though. Lim says the biggest one came in the form of uneven economic recovery, as the country was transitioning from the after-effects of the coronavirus pandemic and political upheavals. But the firm was able to use it to its advantage.

“We saw the uneven economic recovery and political flux as transient issues. The lacklustre market conditions presented us with a buying opportunity. The investments paid off, as the companies benefited from economic reopening eventually and a reduction in risk premium when there was greater clarity on politics,” says Lim.

Despite the turbulence, the firm made no significant rebalancing in asset allocations. “As we are still in the early phases of the recovery cycle and supported by favourable government policies, we were well invested during the period,” she says.

Lim hopes policymakers will continue the supportive policies to enable fund managers to navigate the persisting volatility. “We believe the bigger issue for asset returns in 2022 will be government policy rather than economic growth.”

Apart from that, Lim says geopolitics might affect returns in the near term, following the Russian invasion of Ukraine. In the longer term, she anticipates the gradual tightening of monetary policies globally to result in headwinds to returns.

She says: “As economies have recovered and inflation remains high, we expect many central banks to tighten monetary policy, and this could provide some headwind to asset returns.

“Historical evidence suggests that US equities have positive returns on average during tightening cycles, albeit lower than returns during periods of loose monetary policy.

“In 2020 and 2021, the global equity market posted double-digit returns supported by government stimulus. In 2022, we expect returns to be more modest as some of the stimuli is reduced.”

Against a backdrop of rising rates, however, UOB Asset Management expects sectors such as financials to outperform while sectors such as utilities lag, considering the past performance of these sectors.

“As for fixed income, we would be slightly below duration neutral. We prefer Malaysian ringgit-denominated debt to US dollar ones, given the more modest rate hike expectations for the former. We prefer corporates over government issues for yield pickup and better credit metrics with improving macro,” Lim says.

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