This article first appeared in The Edge Malaysia Weekly on March 24, 2025 - March 30, 2025

Xav Feng, director of LSEG Lipper Asia Pacific Research, says 2024 was a good year for fund managers underpinned by the artificial intelligence (AI) trend and lowering of interest rates by the US Federal Reserve. But this year could be a rough one for the Asian markets due to US President Donald Trump’s trade and tariff policies.

He says investors entered 2024 with cautious optimism as major indices continued their upward trajectory from a year ago. The S&P 500 and Nasdaq Composite posted gains, driven by strong performances in the technology sector, particularly those involved in AI.

Furthermore, last year came the long-awaited monetary easing cycle as the Fed cut rates three times between September and December by about 100 basis points, lowering the Fed funds rate to between 4.25% and 4.5%.

“The MSCI All Country World Index made a total return of 19.6% in 2024, outpacing government bonds, corporate bonds, cash and commodities. The market was led by the US and China,” says Feng.

He says the US equities delivered another strong performance, with the S&P 500 posting total returns of 23.31% and the Nasdaq jumping 28.64% last year, bolstered by the continued rise of mega-cap stocks.

“The ‘Magnificent Seven’ maintained their dominance, generating outsized gains. They now account for one-third of the S&P 500’s market capitalisation and delivered more than four-fifths of the benchmark index’s performance in 2024.”

On the other hand, Chinese economic activity remained subdued in 2024 as it contended with depressed property prices and fragile consumer confidence. But the more coordinated policy measure announced in September by the Chinese government helped propel the Shanghai Composite Index to a 12.67% gain, while the Hang Seng Index surged 17.67%.

Hence, it is not surprising that the global fund flow trend, presented by Feng during the LSEG Lipper Fund Awards on Feb 24, at the Four Seasons Hotel in Kuala Lumpur, showed net inflows of US$2,793 billion in 2024, the second-highest number in the past decade.

The highest net inflows for global funds in the last 10 years was in 2021, at US$3,232 billion.

Breaking it down to the different categories of funds, US equity funds recorded net inflows of US$341 billion last year, the second highest among all, while global equity funds experienced net inflows of US$194 billion.

Yet, US dollar money market funds were the most popular last year with net inflows of US$834 billion. The yuan money market funds were also well received with net inflows of US$289 billion.

Closer to home, the FBM KLCI grew 12.9%, making Malaysia one of the region’s best-performing markets in 2024 after years of lagging behind its regional peers.

In August, Malaysia’s central bank announced that the country’s gross domestic product (GDP) grew 5.9% in the second quarter of 2024 (2Q2024), the strongest economic expansion in Southeast Asia after Vietnam and the Philippines. Southeast Asian countries’ central bank also forecast Malaysia’s economy to grow 5.1% in 2024, as strong domestic demand and investment offset a downturn in commodities.

(On Feb 24, 2025, Bank Negara Malaysia announced that the Malaysian economy expanded 5.1% last year.)

Feng points out that Malaysian bond funds recorded the highest number of net inflows last year at US$1.869 million, followed by money market funds (US$649 million) and mixed assets (US$506 million).

Despite the positive performance of the local stock market, equity funds experienced net outflows of US$425 million, followed by real estate funds with net outflows of US$524 million.

“The positive performance of Malaysia’s equity market is underpinned by the strong economic fundamentals of the Malaysian economy, along with several macroeconomic factors. However, investors were less confident in the equity market and preferred to invest in fixed income,” says Feng.

Looking ahead, Feng says the biggest force to hit the Asian markets this year will likely come from the US as Trump is now in his second term as the country’s president.

“Trump’s tariffs are reshaping the US trade policy and overhauling decades of free trade agreements with friends and foes alike. The trade posturing could have ramifications for inflation, with the potential to push prices higher. This, in turn, could influence the Fed’s interest rates in the coming months, and years. We want to highlight the potential risk for investors to pay attention to,” he says.

During the awards event, Feng said Lipper Leaders officially released its expense rating this year to track the total expense ratio (TER) of unit trust funds.

As at Feb 10, a total of 1,079 funds had published their TER in their annual reports and Lipper had assigned the rating to 793 funds registered for sale in Malaysia.

Feng explains that the TER is a measure of the total cost of a fund to an investor. Total costs may include various fees, including purchasing, redemption and auditing fees, and other expenses.

The TER, calculated by dividing the total annual cost by the fund’s total asset averaged over that year, is denoted as a percentage, he adds.

“TER has a direct bearing on a scheme’s net asset value (NAV) — the lower the expense ratio of a scheme, the higher the NAV. Thus, TER is an important parameter while selecting a mutual fund/unit trust scheme. It is the primary data in the calculation of the Lipper Leader Expense Score.

“Lipper is collecting enough available data in Malaysia and we think it’s the right time to announce the Lipper Expense Rating in Malaysia,” says Feng.

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