KUALA LUMPUR (March 20): AHAM Asset Management Bhd, which has suspended the dealings in units of two of its bond funds, said that collectively the fund size of the AHAM Single Bond Series 2 and AHAM Single Bond Series 4 represents less than 0.1% of its total assets under management of RM77 billion (as at Feb 28, 2023).
"All of our other bond funds managed by AHAM have negligible or zero exposure to Credit Suisse AT1s and as such, any further impact is minimal," said AHAM, formerly known as Affin Hwang Asset Management Bhd, in a statement.
AHAM pointed out that the announcement by the Swiss regulator Finma was unprecedented in nature, which led to the complete write-down of the bonds as part of the rescue package.
“We are currently working closely and proactively with our distributors and clients to manage the situation," it said.
This comes on the back of the crisis at the Credit Suisse Group, which, according to a communique issued by AHAM to its investors, is experiencing a crisis of confidence, resulting in a considerable outflow of deposits.
Both the AHAM Single Bond Series 2 and 4 invested in the Credit Suisse Additional Tier 1 (CS AT1) bonds. The Series 2 fund has the CS 6.375% AT1 as its underlying bond, while the Series 4 fund has the CS 5.25% AT1 as its underlying bond.
“Over the weekend, Finma has announced its approval for the takeover of Credit Suisse Group by UBS Group. The Credit Suisse Group is experiencing a crisis of confidence, which has resulted in considerable outflows of deposits.
“This was intensified by the upheavals in the US banking market over the past two weeks. There was a risk of the bank becoming illiquid, even if it remained solvent, and the regulators deemed it necessary to act in order to prevent serious damage to the Swiss and international financial markets,” said AHAM in the communique to investors on Monday (March 20).
Finma refers to the Swiss Financial Market Supervisory Authority.
In the communique, AHAM highlighted that while the transaction has prevented the bankruptcy of Credit Suisse, the extraordinary government support will trigger a complete write-down of the nominal value of all AT1 bonds of Credit Suisse in the amount of around 16 billion Swiss franc (RM78 billion).
"This has a direct impact on AHAM Single Bond Series 2 where the underlying bond is the CS 6.375% AT1 (ISIN: USH3698DCP71) and AHAM Single Bond Series 4 where the underlying bond is the CS 5.25% AT1 (ISIN: USH3698DDA93)."
In line with the objective of the funds, they were only invested in the CS AT1 bonds. However, the funds were about 85% invested in the bonds, with the rest in cash.
As it stands now, AHAM as manager of the funds and CIMB Commerce Trustees Bhd as trustee of the funds have decided to suspend the dealing of units of bonds funds, said AHAM in the communique.
“We are continuously monitoring and assessing the situation and will inform you should the funds undergo an early termination as described in the respective fund information memorandum,” said AHAM.
Based on data available on Bloomberg, the AHAM Single Bond Series 2 was last priced at 31.56 sen per unit on March 17. The fund had plunged 62.81% since Feb 7, when it was priced at 84.87 sen per unit. As of March 17, the fund had RM30.59 million under management.
Meanwhile, the AHAM Single Bond Series 4 was last priced at 30.6 sen per unit on March 17, after plunging 62% since Feb 7 when it was priced at 80.42 sen per unit. As of March 17, the fund had RM40.79 million under management.