Hong Leong Asset Management Bhd (HLAM) continued its winning streak, taking home eight awards at the Refinitiv Lipper Fund Awards 2021. It won the Best Equity Group (Provident) award for the second year running.
Hong Leong Dana Makmur won the Best Equity Malaysia (Islamic) awards for the three- and five-year categories and Best Equity Malaysia (Provident) award for the three-year category. Hong Leong Asia-Pacific Dividend Fund bagged the Best Equity Asia-Pacific ex-Japan (Provident) awards in the three-year and five-year categories.
Hong Leong Growth walked away with the Best Equity Malaysia Diversified (Provident) award in the five-year category while Hong Leong Dividend won the Best Equity Malaysia Income (Provident) award in the five-year category.
HLAM CEO Hoo See Kheng says over the past years, the company’s funds have performed well despite the many uncertainties and challenging macro events. He believes that being consistent in their investment approach and strategy was the key to attaining long-term and sustainable fund returns that met clients’ expectations.
“A competent and highly motivated investment team is also critical in ensuring that the investment process is well executed to deliver the desired fund performance,” he says.
Last year was certainly an unprecedented and eventful period. All asset classes experienced a correction when global economies were forced to enter into a lockdown. The world saw negative oil prices, Covid-19 outbreaks, the rise in retail investors’ participation in global equity markets and the unexpected change of government in Malaysia.
“Against a challenging investment landscape that was very dynamic and evolving almost on a monthly basis, we battened down the hatches and made even greater efforts to look for investment opportunities and identify companies that were possibly mispriced by investors.
“Despite the logistical difficulties caused by the lockdown, we persevered to establish regular engagement with the management of various companies, an exercise which was more relevant due to the rapidly changing economic and geopolitical climate,” says Hoo.
“As the Covid-19-related recession and the economic recovery that followed had vastly divergent impacts across different sectors and companies, we believe that a thorough understanding of the company’s fundamentals and a precise appraisal of the company’s outlook were critical in driving HLAM’s fund outperformance,” he adds.
The stellar fund performance is a testament to HLAM’s belief that a bottom-up stock-picking strategy is the ideal investment approach for the local market. This strategy has stood the test of time and will continue to be highly effective in creating sustainable performances for the funds, says Hoo.
“Although we acknowledged that much of what happened in 2020 was highly unusual, we did not see the need to change our investment approach, which has served us well in the past.
“In fact, using the same active fund management and high conviction approach has proven to be very effective for us. We intensified our research efforts to capitalise on some of the buying opportunities that were present in the midst of extreme volatility.
“We believe having a deep understanding of the company and knowledge of its business outlook is critical, particularly in an economic environment that tends to lead to very divergent prospects among different industries and sectors,” he says.
Hoo adds that the team found itself in uncharted waters last year with very little historical context to refer to. “However, we are of the view that when a company’s fundamentals and outlook remain intact, the stock price will eventually reflect the company’s intrinsic value. We also maintained our discipline in assessing the valuation of the company at all times, carefully weighing the potential upside against the downside risks before investing in it.
“Again, we stuck closely to our belief that a bottom-up stock picking strategy is the ideal investment approach and were constantly on the lookout for opportunities.
“As such, the funds were well invested throughout the whole year, even during the sharp decline in March. We took advantage of the severe price dislocations to establish positions in well-managed companies that were trading at very attractive valuations,” he says.
For instance, the firm invested in selected export stocks, particularly companies in the technology and manufacturing sectors, to capitalise on the shift in consumers’ spending habits. These stocks benefited the firm’s award-winning funds last year.
As for 2021, Hoo says the firm is positive on the outlook for equities. The current vaccine rollout has proven to be very effective against Covid-19 and he expects life to gradually return to pre-pandemic times.
“The generous fiscal stimulus and accommodative monetary policies by the central bank is expected to continue to support equity valuations. For our funds, we prefer the export sector as we expect it to benefit from the improving external demand.”
Recent global economic data points to a robust economic recovery, says Hoo. “We believe the risk to the economic recovery is a resurgence of the pandemic, although the likelihood appears low at the moment due to the rollout of the vaccine, which is showing promising results.
“Higher-than-expected inflation leading to tighter monetary conditions is also one of the risks to look out for, but the likelihood is low at the moment,” he says.
Over the next 12 months, Hoo expects interest rates to stay low domestically and globally. He believes that savers would seek out investment opportunities that can give better returns than the current deposit rates. “Investment products such as unit trusts with consistent and proven performance track records would continue to do well in the coming year.”