This article first appeared in Personal Wealth, The Edge Malaysia Weekly on April 2, 2018 - April 8, 2018

CIMB-Principal Asset Management Bhd grabbed six individual awards at The Edge-Thomson Reuters Lipper Fund Awards 2018 — two more than last year.

Three funds repeated their winning feat. CIMB-Principal Global Titans won the award for Best Equity Global (Provident) in the three and five-year categories, CIMB-Principal Asian Equity took home the award for Best Equity Asia-Pacific Ex-Japan (Provident) in the five-year category and CIMB Islamic Asia-Pacific Equity clinched the award for Best Equity Asia-Pacific Ex-Japan (Islamic) in the five-year category.

This year, CIMB-Principal Equity Growth & Income won the award for Best Equity Malaysia Diversified (Provident) in the five-year category while CIMB-Principal Income Plus Balanced was awarded Best Mixed Asset MYR Balanced in the five-year category.

CEO Munirah Khairuddin describes the fund house’s investment philosophy as an “early identification of change”. She says the essential factor for making successful investments is to identify fundamental changes and then select the right securities, all before the others notice or act upon these changes.

Munirah says CIMB-Principal Global Titans has benefited from this philosophy as well as the robust investment process. “For example, when the US markets weakened considerably due to the disappointment over President Donald Trump’s failure to pass the Healthcare Reform Bill, as well as fears over investigations into Trump’s campaign infringements, we took the opportunity to step up our allocation to the US, with the view that underlying US corporate earnings growth would be among the strongest in the developed world,” she adds.

“Another source of value add for the fund is that we are constantly monitoring and reviewing the performance of the underlying funds to optimise investment returns. We also actively replace poorly performing or inconsistent funds with better ones.”

Munirah says the differences in developed market returns were very narrow in common currency terms last year. “We did not make any major strategic shifts in allocation, although several minor tactical shifts were made to take advantage of price movements.”

She says CIMB-Principal focuses on the longer-term fundamentals to avoid being wrong-footed in a volatile market. She points out that ultimately, the value of an investment rests upon the quality of its earnings, discount rate and cash flow growth.

As long as global economic growth remains robust, Asian assets are still attractive relative to the rest of the world, says Munirah. She adds that Asia is entering the rate hike cycle with fundamentally strong metrics, including improved credit accounts, low inflation and low indebtedness.

“Hence, we expect Asia can afford to raise interest rates at a slower pace than the US without destabilising local currencies. Asian economic growth and equity markets should also be able to withstand 10 years of risk-free rate hikes beyond 3%. Asia’s equity market valuations are at fair value, so we expect moderate returns.”

Munirah says the fund house thinks this year could be a tale of two halves and it continues to favour Asian equities while remaining fully invested in the first half of the year. “For the second half of 2018, we are concerned about the pace of rising inflation, the potential impact from slower growth of central bank balance sheets and the implications of slower growth in China in the second half of the year. We favour Asian equities and bonds, with a long-term strategic asset allocation of 60% equities to 40% bonds.” — By Laili Ismail

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