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UOB AM launches income FOF in Malaysia

Mercer will recommend the underlying funds of the portfolio.
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UOB Asset Management in Malaysia has launched the United Global Income Allocator Fund (UGIAF) to retail investors in the country, according to a statement from the firm.

The product is the first fixed income fund-of-funds (FOFs) made available to retail investors in Malaysia, the firm claims. It invests in fixed income funds that invest in global bond markets, which include global high yield and Asian bonds.

According to the firm, fixed income FOFs are typically available only to institutional investors, such as pension funds and sovereign wealth funds.

“As global interest rates remain low, we believe the launch of the United Global Income Allocator Fund is timely as it can potentially offer investors better yield,” Lim Suet Ling, UOB AM’s CEO for Malaysia, said in the statement.

The fund also aims to provide regular income.

“By investing in different fixed income funds, ranging from investment grade to high yield, the UGIAF aims to provide investors with diversification across the entire fixed income classes. The fund is also invested across both Asian and global bonds, with the objective of providing investors with long-term, regular income streams,” Lim said.

Funds that provide income were popular among investors in Malaysia last year, as five of the top 10 funds in 2019 that had the highest net inflows were income funds, according to data from Morningstar Direct.

In total, fixed income funds led the inflows in Malaysia’s mutual fund industry, with nearly $14bn of net new money coming in last year.

Mercer as advisor

UOB AM noted that Mercer is the sub-investment advisor of the new FOF, in which it will recommend the underlying funds of the portfolio and monitor the selected funds, according to the statement. Mercer will also recommend replacement funds should a previously selected fund fall out of the portfolio’s buy list.

Only funds that are rated by Mercer as “A” or “B+” will be considered for the fund’s investments.

UOB AM, which is the investment manager of the fund, will then evaluate the recommended fund’s performance, income distribution, investment policies, as well as consider global macroeconomic trends before making a decision.

Meanwhile, UOB AM in Singapore will perform the overall due diligence on Mercer and its fund review process. The Singapore parent, which is the investment adviser of the fund, will also ensure that the fund is kept within its investment guidelines and limits.

UOB AM, which is headquartered in Singapore, manages S$36bn ($25.9bn) in assets across the region, according to the statement.

Part of the Mark Allen Group.