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

Eastspring Investments Bhd was again the biggest winner of individual awards at The Edge-Thomson Reuters Lipper Fund Awards 2018, where it bagged a whopping 14 awards in the equities and fixed income space.

Chief investment officer Rudie Chan attributes the success to its bottom-up stock-picking approach to identify quality companies locally and regionally. The investment team’s adherence to its value investing philosophy and principles while staying nimble to mitigate market volatility also contributed to its wins.  

Eastspring Investments Asia Pacific Equity MY, which invested in 60 to 80 stocks in Asia-Pacific ex-Japan, has applied a disciplined, value-oriented investment approach for the last 10 years. The fund holds a diversified basket of stocks that the investment team deems attractive and has a high conviction in.  

Eastspring Investments Dana Dinamik adopted a more nimble strategy to mitigate market volatility. The balanced fund invests in quality stocks with good fundamentals and long-term prospects. It also has a robust asset allocation process to strike the right balance between the different asset classes to achieve its desired returns.

Eastspring Investments Small-Cap, a steady outperformer in the equity mid and small-cap space, is another example of the fund house’s ability to identify good companies and invest over the long term to reap good returns. “The fund’s success lies in our ability to look out for quality companies with good management and strong growth potential. Our investment horizon is typically more than three years to ride the growth phase in our investee companies,” says Chan.

He adds that the fund house did not encounter huge challenges in 2017 as the local market was on a bull run, developed markets were up and emerging markets performed even better. The MSCI Asia Pacific Index rose more than 40% last year.

On the home front, the FBM KLCI was up 9.4% while the FBM Mid 70 Index was up 23.4%. These returns were even higher in US dollar terms as the ringgit appreciated substantially against the greenback.

Chan says Eastspring faced the challenge of chasing the bull market last year to try and reap the full benefits. “Our headache was to chase a bull market fuelled by higher risk appetite and abundant liquidity. Some of the speculative stocks did very well and this was a space that institutional investors such as ourselves do not get involved in. As a result, we had to work extra hard to chase the index by having superior stock selection.”

He adds that the fund house was bullish on equities last year and stayed invested throughout the year. “Every dip in the market was a good buying opportunity for us.”  

Chan and his team are confident about the general outlook for the Malaysian economy. He says the local economy is expected to be healthier on the back of resilient consumer spending and increased private and public investments. “We expect stocks in the banking, consumer, gaming and manufacturing sectors to benefit from this economic condition.”

However, despite the positive outlook, market volatility is expected to increase this year on the back of central banks globally normalising interest rates. On top of this, investors were complacent last year on the back of strong gross domestic product growth, high levels of liquidity, benign inflation and improving corporate earnings.

The key risk going forward will be a change in monetary policy normalisation by major central banks that will impact global liquidity. “These may be caused by a quicker increase in global inflation, higher wage growth in advanced economies or higher commodity prices,” says Chan.

Other risks include geopolitical events and the US’ increasingly protectionist stance, which may impact the fund house’s investment strategy. “Most of these risks are out of our control and we have to monitor the developments closely. We can only protect our investments by buying into good companies that can better withstand economic shocks.”

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