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Malaysia’s Affin Hwang launches absolute return feeder fund

Kuala Lumpur-based Affin Hwang Asset Management has launched a mixed-asset absolute return fund that feeds into a Schroders fund, according to a statement from the firm.
Malaysia’s Affin Hwang launches absolute return feeder fund

The fund is available only to sophisticated investors, which include high net worth individuals and institutional investors.

The new fund, the Affin Hwang World Series – Global Target Return Fund, will invest at least 80% of its assets in the Schroder ISF Global Target Return Fund and the remainder into money market instruments, deposits and other liquid assets.

The Schroder fund aims to provide capital growth and income, which is targeted at the US dollar three-month Libor plus 5% per annum, gross of fees, over rolling three-year periods, according to its fund factsheet. The fund invests in equities, bonds and convertible bonds, as well as in currencies and alternative asset classes such as real estate, infrastructure and commodity-related instruments.

The fund may also invest in the different asset classes directly or indirectly through other mutual funds and derivatives, the factsheet notes.

The fund focuses on absolute returns with the goal of minimising both volatility and the risk of large losses, Chan Ai Mei, the firm’s chief marketing and distribution officer, said in the statement.

“In an environment of heightened risks and increased volatility in markets, the role of an absolute return focused strategy has never been more relevant than it is now,” Chan said. “As markets enter a new transition phase, the demand for a dynamic and flexible approach to asset allocation has become more punctuated.”

As of the end of March, 47.4% of the Schroder fund’s assets were invested in government bonds, 23.5% in mutual funds and 21% in equities.

Although economic conditions have been good, with improving corporate profits and low inflation, and while the US tax cuts is a clear pro-cyclical boost to corporate growth and profits, the rise in equity prices from December to January was “an over-exuberant response leaving both sentiment extreme and valuations extended”, Stephen Kwa, head of product for fixed income and multi-asset at Schroders Australia, said in the statement.

“To be clear, we believe it’s premature to call the end to the bull market in equities just yet, as most bull markets end with recession and the risk of recession in any of the major economies at present is low,” he noted.

Besides the Global Target Return fund, the firm also launched in January the Global Quantum Fund, which is another global feeder fund that invests in the Standard Life Investments Global Sicav II Global Smaller Companies Fund, according to the firm’s website.

In total, the firm manages eight wholesale feeder funds, with four of them investing in global assets.

In Malaysia, partnering with domestic fund managers to launch feeder funds remains the best strategy for foreign asset managers. The AUM for feeder funds in Malaysia had double-digit annual growth in 2016, the latest figures available, according to a Cerulli Associates report.

The performance of the Schroder ISF Global Target Return Fund versus its benchmark since the fund’s inception.

Part of the Mark Allen Group.