KAF Investment Funds Bhd won the award for Best Bond MYR in the three-year category at The Edge-Thomson Reuters Lipper Fund Awards 2017.
Chief investment officer Gan Kong Yik attributes the win to its mandate. “The KAF Enhanced Bond fund is allowed to invest up to 10% of the portfolio in equities to enhance returns. We basically apply the same investment philosophy of all other well-performing equity funds.”
The winning fund saw an average return of 1.14%, 5.83%, 3.35% and 4.02% over the past one, three, five and 10 years respectively.
Gan sums up the performance of the financial markets last year as volatile, uncertain and very challenging. He says KAF will continue to use a top-down stock selection approach to maintain its performance.
“We select sectors based on strong macro fundamentals. Then, within those sectors, we pick stocks that we think are undervalued. We believe it is best to be overweight on sectors we prefer, such as plantation, infrastructure, construction, essential consumer stocks and exporters (including select technology stocks). But we are also mindful that some stocks in those sectors are overvalued.”
The fund house prefers to be nearly fully invested rather than sit on a lot of cash. “We believe sticking to undervalued stocks in a market that has underperformed for the last three years should keep us in good stead despite the heightened volatility,” he says.
Gan believes that those who invest in pure equity funds can expect better returns this year than in previous years as the returns over the last three years have been subdued. “We also feel that equity funds that have exposure to small and mid-cap companies should provide investors with better returns,” he says.
With the current economic outlook, the plantation, infrastructure, basic consumer product and export sectors are expected to perform well this year, says Gan. “Plantations will perform positively due to the currently strong crude palm oil prices. We prefer plantation companies that show production growth and have a young tree profile.
“In terms of infrastructure and construction, we believe that the government will roll out all promised construction jobs and use these projects to stimulate the local economy.
“As for consumer products, consumer spending will gradually increase as it has been more than a year since the Goods and Services Tax was implemented (as seen in other countries). Export players will benefit from the weak ringgit, which is likely to continue for a while.
“The sectors that we will be avoiding are banking, due to limited earnings growth and net interest margin contraction, and oil and gas as the recent oil price recovery may not be sustainable due to ample supply and weaker global demand.” — By Nur Azlin Abdul Karim