Fund managers see RM32b loss as investment values drop

AUM falls 4.2% YoY as investors withdraw money for lower risk assets

by SHAZNI ONG/ pic by TMR File

THE fund management industry saw a loss of RM32.6 billion in assets under management (AUM) as investors withdrew money and equity markets fell in value. The AUM by the industry fell by 4.2% year-on-year (YoY) to RM743.6 billion in 2018, the first drop since 2008, as investors withdrew money for lower risk assets.

“Markets last year did not perform well, so the natural tendency for investors would be to pull out their investments. They don’t invest back. They go to fixed deposits or something safer,” FSMOne Malaysia (FSMOne) GM Wong Weiyi (picture) said.

According to the Federation of Investment Managers Malaysia data, despite the fall in AUM last year, the fund management industry saw an average compound annual growth rate of 12.8% in the past decade.

Maybank Asset Management (AM) Group Bhd lost about RM9 billion in AUM from September last year to end May, 2019, as investors shifted money out and into risk averse investments like fixed deposits.

Maybank AM managed RM24.7 billion in AUM at the end of May.

Wong said the fall in the industry AUM value was also partly due to exposure to the weaker equity markets.

“If the markets continue to do well like what we’ve seen in the first half of 2019 (1H19), we believe investors will continue to recover and the AUM will go up,” Wong said.

He expects the Malaysian equity market to perform better in the 2H19 on the back of a clearer execution of fiscal and economic policies by the new government.

The US-China trader dispute disrupted business operations and hit earnings in the 1H19.

“We acknowledged that earnings growth can still be challenging for the Malaysian market, but the market valuation at between 16 times to 17 times is undemanding. We now have more clarity over government policies and we have renewed infrastructure project developments which are among the positive factors,” he said.

The prospects of central banks in developed markets shifting towards a more dovish stance could help ease the liquidity condition and fund inflows into  emerging markets like Malaysian equities,” he told reporters after the FSMOne Recommended Unit Trusts 2019/20 Awards Ceremony in Kuala Lumpur yesterday.

The local equity market actually staged a rebound from losses in 2018 only to be disappointed in the May period, when the US-China trade war escalated again leading to Washington targeting Chinese technology companies like Huawei Technologies Co Ltd.

He said the prospect of an easier monetary conditions and possible progress on the restart of trade talks between the US and China, emerging after the Group of 20 Summit in Japan recently help the local market rebound.

Wong noted FTSE Russell move to place Malaysian Government Securities (MGS) under review for its World Government Bond Index amid liquidity concerns has impacted the MGS segment and sparked a minor sell-off in the ringgit.

“While we foresee an increase in volatility within the local bond space in the months ahead, this asset class will remain relevant to investors for diversification benefits. If there is any further sell-off, we believe it will offer an attractive opportunity for investors to buy on the dip.

“The ample liquidity from domestic institutional investors is likely to lend support to bond prices,” he said.