Asset managers dragged by weak local equities, say analysts

by SHAHEERA AZNAM SHAH/ pic by BERNAMA

MALAYSIAN asset management companies have been turning in unexciting performances due to the lacklustre local equity market, said analysts.

Permodalan Nasional Bhd (PNB) recently announced a total distribution of 5.5 sen per unit for Amanah Saham Bumiputera (ASB) unitholders, lower than last year’s total distribution of seven sen per unit.

The payout, PNB’s lowest ever, was attributed to weak equity markets and ongoing US-China trade tensions.

However, the income distribution was still higher than Malayan Banking Bhd’s (Maybank) 12-month fixed deposit (FD) returns rate, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid (picture) noted.

“In the case of ASB, their benchmark level in terms of returns is based on Maybank’s 12-month FD rate, which is at 3.1% for a 12-month tenure.

“It’s not too bad, PNB is still above the benchmark. ASB investors are still better off,” he told The Malaysian Reserve (TMR).

Sustaining the diversity of PNB’s assets portfolio is imperative to secure better returns, Mohd Afzanizam added.

“Each manager has its own strategic asset allocation, typically around 20%, that is allocated for overseas investments for diversification and to spread out the risk to get better returns,” he said.

The Employees Provident Fund (EPF) also fared poorly in its third quarter ended Sept 30, 2019 (3Q19), where investment income fell 7.6% to RM13.5 billion from a year ago amid weakening market conditions and ongoing uncertainties caused by the trade war.

For 2018, the EPF declared a dividend of 6.15% for conventional savings and 5.9% for Shariah savings, lower than the 6.9% (conventional) and 6.4% (Shariah) dividend rates paid in 2017.

Both the EPF and PNB — respectively Malaysia’s largest pension fund and largest fund manager —have diversified portfolios that include property, equity, bonds and more.

“The rather disappointing performance this year could be due to the lacklustre performance of the local bourse,” Fundsupermart research analyst Jerry Lee said.

“For the year-to-date, Malaysia’s equities market is the worst-performing market globally, especially in the big-cap sector. Hence, with quite a portion of their investments in local big-cap companies, the rather disappointing performance is understandable.”

Investors should look at other options to further diversify their investment through unit trust funds that invest in foreign equities, Lee added.

“From an investor’s perspective, every investor is definitely looking for higher returns. Having said that, investors should also understand the underlying risk of investing in a certain product.

“I think the recent launch of the EPF’s i-Invest platform opens up more investment options and makes it easy for investors to further diversify their investment via unit trust funds,” he said.

PNB on Wednesday announced an income distribution for ASB of five sen a unit and a bonus of 0.5 sen for 2019, bringing the total payout to RM9 billion for more than 10 million unitholders.

Amanah Saham Nasional Bhd, PNB’s wholly owned unit trust company, announced an income distribution of 2.75 sen a unit for Amanah Saham Nasional — its variable price fund — for the financial year ending Dec 31, 2019, which reflects a dividend yield of 4.4% based on a net asset value as at Dec 16, 2019.