Unit trust sales, redemption impacted by MCO

By SHAZNI ONG / Pic TMR

UNIT trust sales and redemption volumes have fallen from pre-pandemic level as the Movement Control Order (MCO) has impacted engagement, a fund management company observed.

Affin Hwang Asset Management Bhd (Affin Hwang AM) said investors are unable to meet their wealth relationship managers due to the MCO, thus, making it harder to transact.

“Investors are also watching the markets and not in a hurry to redeploy back so quickly, although some are keen to average in since markets have corrected sharply,” its chief marketing and distribution officer Chan Ai Mei told The Malaysian Reserve.

Chan said with the Covid-19 transmission contained in China, the firm sees a pick-up in economic activities and investor interest in China-based funds.

“We notice some appetite returning among investors for China solutions and funds but volumes are still small. But things are still very fluid and as soon as we see another wave of infection spiking, this would spook markets again.

“Hence, volatility is still at the forefront of most investors’ decisions at this point in time and it makes timing very difficult,” she said.

Chan added that the firm saw investors redeeming their investments from equity and fixed-income funds that did exceptionally well in 2019.

“However, these were not a major concern as our portfolios were liquid enough to meet any redemption that comes in. Daily redemption on individual funds was less than 1% of the total fund size, hence, there were no issues managing them,” she said.

Chan said all of Affin Hwang’s unit trust funds made money for investors last year.

Affin Hwang AM has declared a total of RM94.88 million distributions for 18 funds in March 2020. Its Affin Hwang Select Income Fund (SIF) for example announced a payout of 75 sen per unit, according to a statement yesterday.

Its Global equity strategy fund returned 25% while the European Unconstrained strategy made returns of 23%, Global Small mid-cap 19% and Asian equity strategies 16%.

“Local equities were weaker delivering above 4%. The returns from the Balanced/Mixed Asset strategies ranged between 10% and 17%,” she said.

Its fixed-income funds did exceptionally, delivering 7% to 10% returns across local and Asian focused fixed strategies.

The fund manager saw huge inflows into its fixed-income strategies in excess of RM2 billion last year which continued until the beginning of this year.

However, when Covid-19 was declared a pandemic and fears escalated due to how quickly the virus could be transmitted, this spooked investors and the firm saw a spike in redemptions in March.

“The redemptions were very manageable as some investors took the opportunity to take profit from the gains in 2019 and sit on the sidelines to wait for markets to stabilise before redeploying back.

“In terms of fund performance for first quarter (1Q), all equity strategies were down between 10% and 23% year-to-date (YTD) with an exception of our Absolute return strategy fund which was only down 3.5% YTD as we employed hedging strategies to protect the portfolio as markets were being sold down heavily. Balanced/Mixed Asset strategies were down 5% to 10%. Fixed income funds were also not spared registering negative returns of between 0.2% and 5%,” she said.

Chan opined no fund, except cash funds were spared as all asset classes were sold off given the uncertainty in markets remains high.

Chan remains optimistic for the unit trust fund industry as it has remained robust across various market cycles and it will recover and the larger asset managers will continue to grow stronger and remain relevant.

“The key is how every fund management company handholds and stays tight with their clients during this period that would make a difference.

“It is in these turbulent times, we need to be even closer to our clients to update them on the markets and our portfolio strategies and positioning,” she said.