Aboi To Finally Invest In Aberdeen Islamic World Equity Fund

You can read my previous post about Aberdeen: Aberdeen Funds in Malaysia..Are They "Iron" Clad Investments?

Thanks to my close friend (whose also an avid and knowledgeable investor) I obtained the interim report (December 2013) for Aberdeen's Islamic World Equity Fund just today. You can access it here: Interim Report Dec 2013. I spent some time looking through it from top to bottom and here are the key takeaways:-

[1] As at 31 December 2013, the size of the Fund stood at 10.457 million units. That's a bout RM12.25 million in net asset value. As small as it could be, that's good.

[2] Total fund return for 2013 is 17.27%, under performing the benchmark (MSCI ACWI Islamic (Shariah) Index) return of 20.69% by 3.42 percentage points. Under performance attributable to Japanese and Taiwanese stock holdings. Not exactly bad as 17.27% itself is an accomplishment.

[3] No change in investment strategy. Shariah-compliant stock selection is based on a bottom-up approach, as it will always be: focused on high-quality companies that offer good, long-term growth potential at attractive valuations.

[4] Heavyweights on Energy and Healthcare sector (40% of total allocation). Heavyweights on United States and the United Kingdom (34%). To be more exact Europe less UK as a whole is the biggest: 32.6%. Aberdeen will benefit the most if the economies of America & Europe (67% of allocation) does well in the coming years. This is a key thing to monitor when invested in this fund.

[5] For the energy sector, United States looks promising as Obama's administration is heading the initiative to make the USA self sufficient. This is another key sector to keep in mind as you are holding this fund.

[6] As for the healthcare sector, Aberdeen is split across several geographies: United States, some European countries, Japan and Brazil. As you can see, exposure is mainly in developed countries. This is good, as healthcare is almost a recession proof industry and is big business in the developed world. I'm not so much worried here, probably don't even need to monitor this sector at all.

[7] As of December 2013, Aberdeen has invested it's asset allocation as much as 97% into equities leaving only 3% cash. With that level of cash, there's no more room to add more into the portfolio. Either Aberdeen is good at selection or they are too aggressive, either way I cannot tell which. The only downside of holding so little cash is when opportunity kicks in Aberdeen will need to sell off current holdings. On the bright side, Aberdeen can do a little more marketing and get cash from investors like me :)

As of this writing, I do NOT own any stake in Aberbeen Islamic World Equity Fund. However I am going to purchase units via cost averaging starting this month: February (investing equal amounts of $ over a period of time until June) to reduce risk because in my opinion, market looks to be trading sideways for awhile now as the US Fed gradually tapers QE. I am expecting a 10% to 15% return per annum on this fund. Anything above 20% is wishful thinking.

I buy all my funds via Fundsupermart platform because they have discounted sales charge which is always lower than the charges of the investment house..

Disclaimer: The reports, analysis and recommendations in this blog are solely my personal views. I do not link to any investment body or company. As such, I will not be responsible of any of your investment decision. Consult your investment adviser or come to your own conclusions before making any investment decision.      

Time To Revisit mREITS (Possible Opportunity in 2014)

I finally received my 'durian runtuh' (windfall) after investing in BSDREIT since 25th August 2010 @ the purchase price of RM1.32. I have actually thoroughly researched mREITs several times and posted them:
06.2010: Investing in Real Estate: Real Estate Investment Trusts
07.2010: Malaysian REITs (Part 1)
08.2010: Malaysian REITs (Part 2 - Updated)
08.2010: MREIT: Al-Hadharah Boustead
03.2013: Which are my MREIT picks for Year 2013?


In July 2013, Boustead Holdings Sdn Bhd announced that it is going to take its REIT unit private, merge it with its plantations unit and then list the unit (new IPO), seeking economies of scale at a time when crude palm oil prices are falling. It was taken private at the price of RM2.10.
Annoucement 1: "We intend to consolidate our plantation assets under Boustead Plantations, while achieving economies of scale and business synergies in our operation."

Announcement 2: "The selective unit redemption by BREIT of all undivided interest in BREIT (“Units”) that are held by all unitholders of BREIT, other than BPB (“Entitled Unitholders of BREIT”) for RM1.94 for each Unit (“SUR Exercise”); and the special dividend of RM0.16 for each Unit that is held by the unitholders of BREIT (including BPB) as a condition to the SUR Exercise as set out in Section 1.3 (ii) above (“Special Dividend”)."

Hence a total return of almost 65% including cumulative dividends over the years. From Aboi's portfolio that's RM9000->RM15000. A very handsome profit indeed after holding it for 3 years. As such it is time to revisit this sector once again. You may read this article as well: Investment REIT attraction for long-term investors. As early preparation, a week ago I have started making two tables; [1] to track mREITs price movements [2] to monitor target price when it hits good yield.

[1] NextView customized Portfolio view - I take a look at this when I'm free

[2] i3Investor customized Portfolio view - Once the Price Diff column hits even point or minus, we reach the targeted good yield (7.5% to 8% depending on which REIT)

I have not come into any conclusion as to which mREIT I will be targeting next partly because it takes time and more importantly there is still room (one to two quarters) before opportunity kicks in (due to economies; long grandfather story), I will leave that for Part 2 and it is going to involve a decent amount of calculations and ratios so stay tuned :)

Why You Should Not Overlook Cashback Cards

Let me give two examples of cards with cash back.
UOB Bank One Card Visa
Highlights:
[1] Petrol: 5% (All petrol stations)
[2] Cinema: 5% (Golden Screen Cinemas)
[3] Groceries: 2% (Tesco, Aeon Big, Giant, Cold Storage & Jaya Grocer)
[4] Pharmaceutical: 2% (Guardian, Watson & Caring Pharmacy)
[5] Telecommunications: 2% (Maxis, Digi & Celcom)
[6] 0.3% for all other purchases not listed above.
[7] Cash back is capped at RM30 for petrol, RM30 for groceries and RM6 for mobile.
[8] Additional SMART$ rebate 5% for GSC and 2% BHPetrol. Other merchants as well not listed here.
This is simply amazing because all are common merchants. Unfortunately it is not as accessible requiring an annual income of at least RM36000 to be eligible for this card.

OCBC Bank Titanium MasterCard
Highlights:
[1] 1% rebate on all retail spending.
[2] No caps on rebates.
Unknown to many the word 'retail' here is misleading. It actually encompasses absolutely any type of spending, be it on their online retail therapy or buying groceries at the local supermarket.
This card is also is surprisingly accessible. Anyone aged 21 years old and above with an annual income of at least RM24000 can apply for this card.

So how much can you actually save per month? Let me give you an example:
-->Take advantage of UOB card on selective merchants.
RM250 petrol @ BHP: RM250 x 5% = RM12.50 (smart$: RM250 x 2% = RM5.00)
RM100 movies & popcorn @ GSC: RM100 x 5% = RM5.00 (smart$: RM100 x 5% = RM5.00)
RM88 telecomm with Digi: RM88 x 2% = RM1.75
RM200 groceries @ Tesco: RM200 x 2% = RM4.00
-->Use OCBC card for your remaining recurrent expenses
RM400 insurance: RM400 x 1% = RM4.00
RM140 broadband with Streamyx: RM140 x 1% = RM1.40
RM400 meal joints that accept credit cards: RM400 x 1% = RM4.00

In total it's all RM32.65 in cash back rebate & RM10 (smart$ rebate).
How much is that per year? RM511.80

RM500 may not seem much but never underestimate the power of compounding. If you had dump this RM500 every year for 5 years when you are 25-30 years old this is what will turn out in 30 years (60 years old):

Your RM2500 will turn into this:
Fixed Deposit (3% p.a.): RM5860 (more than double)
Bond Fund (5% p.a.): RM10206 (quadruple)
Mixed Asset Conservative Fund (7% p.a.): RM17600 (x7)
Mixed Asset Balanced Fund (8.5% p.a.): RM26318 (x10)
Equity Fund (10% p.a.): RM39146 (x16)
*You followed Aboi's Diversified Portfolio (12% p.a.): RM65940 (x26)
*Know how to switch equity funds / targeted fundamentally sound stock (15% p.a.): RM141800 (x56)
*Possible but you have to be damn good: (18% p.a.): RM299234 (x120)
*Somehow you are so gung hu (20% p.a.): RM487390 (x194)

All from using cash back cards and setting aside RM42.65 per month (offset from rebate savings -> investment fund). SIMPLE OR NOT?

Emerging Markets Continue To 'Lao Sai'

"Lao Sai" Hokkien dialect meaning 'dribble shit'. It means a case of diarrhoea. 

As of February the 4th 2014

http://www.thestar.com.my/Business/Business-News/2014/02/07/Emerging-market-equity-fund-outflows-this-year-surpass-whole-of-2013/

As the Federal Reserve makes steps to normalize monetary policy, currency experts 'BUKAN saya' only expect things to get worse for these markets as the U.S. dollar is forecasted to get stronger. However I have talked about this several times albeit primarily w.r.t (with respect to) the Ringgit. [1] Aboi's Updates For February 2014 (Welcoming the Horse) [2] MYR, The Gohmen, Interest Rates, Property - The Linkages and also in my Facebook page @ Aboi's Blog. How long more can BNM defend the ringgit without having to increase interest rates?