This article first appeared in Wealth, The Edge Malaysia Weekly on March 25, 2024 - March 31, 2024

Saturna Sdn Bhd has bagged its first fund award in the LSEG Lipper Fund Awards 2024. The Saturna Asean Equity Fund won Best Equity Asean (Islamic) Fund in the three-year category.

Its president Shahariah Shaharudin says the firm’s focus on shariah as well as environmental, social and governance (ESG) investing was the main reason for the achievement.

“We use a proprietary shariah and ESG screening system. Typically, we invest around long-term secular trends such as energy efficiency, digitalisation, artificial intelligence (AI) and others,” she says.

Investing in the healthcare and communications sectors were among the best strategies employed last year, Shahariah adds.

This is because healthcare companies widely benefited from the post-Covid-19 pandemic recovery. Likewise, communications firms profited from ever-rising global trends around greater data usage, analytics and automation.

Saturna’s winning fund invests exclusively in Asean and the opportunities are centred around AI, the Internet of Things, cloud computing, 5G and other evolving technology trends as well as greater consumption.

“We like the Asean semiconductor

and electronics suppliers as well as tier one global OEMs [original equipment manufacturers]. We also like infrastructure providers like telecommunications [companies], given [their] good dividends,” she says.

One of the notable stock calls that significantly contributed to Saturna’s success was Delfi Ltd, a chocolate manufacturer based in Indonesia with stocks listed and traded on the Singapore Exchange, offering investors exposure to a burgeoning market. The company performed well due to higher demand and effective operational strategies, she says.

Moreover, Delfi boasts a robust dividend yield, further enhancing its attractiveness as an investment opportunity, which showcases the firm’s ability to identify good prospects, says Shahariah.

Last year, Saturna’s asset allocation strategy involved maintaining a cash position of approximately 6% to 7%.

“We buy and hold for the long term without too much active trading or rebalancing,” she says. This strategy allows the firm to stay committed to its investments while minimising unnecessary market activity.

One of the biggest surprises of 2023 was the rapid moderation of inflation and the subsequent shift in the interest rate narrative from expectations of sustained increases to potential rate cuts in 2024, particularly given the initial concerns about rising inflation and its potential impact on economic growth, says Shahariah. “In any case, sustained lower inflation would likely be good for the global economy.”

Despite anticipating the possibility of several interest rate cuts later in the year, she admits that it is challenging to predict the US Federal Reserve’s actions, especially with the country’s recent inflation data showing persistent levels.

“[The US] Fed moves are hard to predict but we believe there could be at least a few rate cuts, perhaps towards the latter part of the year. The probability of no cuts would be quite low,” she says. 

She adds that last year, the financial market was “accentuated by bouts of volatility”.

The biggest risk this year is the US presidential election, she predicts. Especially as Donald Trump is likely to secure the Republican nomination.

Shahariah believes that his presidency could reignite trade tensions with China, which may adversely affect regions like Asean due to the region’s close ties with China.

She says Saturna’s fund managers will continue to adhere to a long-term investment approach in equities, focusing on identifying and capitalising on secular growth trends.

Despite the current economic outlook, she adds that the firm’s strategy remains unchanged, emphasising stability and consistency in investment decisions.

“Macro moves like inflation and rate direction are hard to predict but long-term secular trends like energy efficiency, digitalisation, AI and others continue to play out over time,” says Shahariah. 

“Within equity asset management, we focus on niche areas of shariah and ESG and have a long-term focus. Our plan is to continue to gather new clients around these two focus areas.”

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