Thursday 28 Mar 2024
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This article first appeared in Wealth, The Edge Malaysia Weekly on March 27, 2023 - April 2, 2023

The last couple of years have been a roller-coaster ride for most fund managers because of global uncertainties. According to Xav Feng, director of Lipper Asia Pacific Research, most funds of various asset classes experienced outflows in 2022, compared with conservative net inflows in 2021.

Refinitiv Lipper data also shows that Malaysian equity funds received the highest net inflows among other major asset classes last year, while money market funds experienced the most significant outflows.

Yet, amid much turbulence and market volatility, the ESG (environment, social and governance) funds globally persevered and continued to grow.

“Although ESG funds encountered headwinds in 2022, the estimated net flows were still positive,” said Feng during his presentation at the Refinitiv Lipper Fund Awards 2023 held on March 14 at the Mandarin Oriental, Kuala Lumpur.

According to Refinitiv’s presentation slides, the assets under management (AUM) of ESG funds — including mutual funds, fund of funds and exchange-traded funds — had grown significantly since the start of the pandemic. From about US$1.25 trillion in March 2020, the AUM of ESG funds hit a peak of more than US$2.5 trillion in November 2021, reflecting a growth of more than 100%.

While ESG funds’ AUM fell to slightly above US$2 trillion in September last year, it has started growing again. Equity is the most welcomed asset class in the ESG space.

Touching on the Malaysian market, Feng said there was nearly US$3 billion of net outflows in Malaysia last year.

Anything is possible. And all of you here are creating history. Today, all of you are superstars. Congratulations to you all.” > Feng

Of all the asset classes, equity funds enjoyed the highest net inflows (more than US$2.6 billion). It was followed by mixed asset funds (US$450.2 million) and real estate (RM276.9 million).

Meanwhile, money market funds suffered the highest net outflows at US$4.1 billion, while local bond funds saw net outflows of US$719.3 million last year.

From a sector perspective, Feng pointed out that the leading sectors with the highest net inflows were equity Malaysia, equity global, real estate Asia and equity in the information and communications technology sector.

Malaysian ESG funds saw US$1.3 billion in net outflows last year, a contrast to the global trend. ESG equity funds enjoyed the highest net inflows at US$2.16 billion, followed by ESG mixed-asset funds (US$362.2 million) and alternatives (US$900,000).

On the flip side, local ESG money market funds suffered outflows of US$3.35 billion. This was followed by bond funds’ outflows of US$447.5 million.

Feng said 2022 was an extremely challenging year. But the asset management industry showed tremendous resilience by limiting its losses during market downturns and generating positive returns for investors over the long term.

He also congratulated Tan Sri Michelle Yeoh for her best actress win at the Academy Awards. She created history by being the first Asian woman to clinch an Oscar. The event shows that Malaysia has more to offer the world in terms of its capabilities.

“Last year was a very challenging one for most of our fund managers. It is very interesting to look back at the whole fund flow trend. The changes in our total net assets for the global markets in the past few years have been like riding a roller coaster, which only reflects the sentiment of the market towards major events,” said Feng.

“Global markets were heavily hit by the pandemic in 2020. It was also because of the [subsequent] Russia-Ukraine war, the rapid global inflation and the US Federal Reserve’s consecutive interest rate hikes. However, all of you have shown tremendous resilience in such a challenging year and during the year of the pandemic.

“I’m sure that you heard about the Oscars. Michelle Yeoh has become the first Malaysian, and Asian, ever to win an Academy Award. Any-thing is possible. And all of you here are creating history. Today, all of you are superstars. Congratulations to you all.”

Feng also reminded the audience that 2023 is a meaningful year as it is when Refinitiv Lipper turns 50 years old.

“From technology changes, like the development of the internet, to regional conflicts, economic and political changes, and most recently, the global pandemic we all suffered, [we’ve seen] massive changes to our financial system regulations, product diversification, pension reforms and the rise of ESG. It is incredible to think how the fund management industry has changed and continues to grow over half a century,” he said.

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