This is the last update on Mutual Funds in Malaysia. Links to my first two:
Aboi's Updates For Malaysian Bond Mutual Funds for 2H'2015
Aboi's Updates For Malaysian Mixed Assets Mutual Funds for 2H'2015
Aboi's Updates For Malaysian Bond Mutual Funds for 2H'2015
Aboi's Updates For Malaysian Mixed Assets Mutual Funds for 2H'2015
Equities
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| TER is the total expense ratio, a measure of total cost (purchase, redemption, auditing, management fees) of a fund to the investor. The lower the better. |
Commentary
[1] The rankings between 2H'2014 vs now show a very big mess, yes! It is very clear now which funds perform better under stress (during bad times, e.g. Msia market dropped due to cheaper oil and weakening myr, China's panic selling, Grexit and default).
[2] 4/5 of picks since being added in the four broad categories have since performed well (I won't say admirably given these bad times): Kenanga Growth, Select Opportunity, Eastspring Equity Income and Select Asia Quantum.
[3] The big let down was Hong Leong's Consumer (and now has a competitor Libra's Consumer and Leisure Asia). The fund's exposure to the Malaysian market is huge and consumer based stocks has suffered due to GST. Under flagged. Public's Far East Property did perform well but it only managed to return to its 2013 peak return level and the momentum has fallen. I maintain its under flagged rating. Thus I've temporarily removed Hong Leong Consumer & Public's Far East Property.
[4] As of this writing, I own Kenanga Growth Fund which has been performing above my expectation. Now the fund has a high level of cash 25-30% as such I expect it to wait for opportunities to accumulate during bad times.
[5] Remember that I shun Philip Master Equity Growth due to high TER (total expense ratio) of 4%. It has been performing abysmally; dropping from the top spot to the edge of #29.
[6] I also own Aberdeen Islamic World Equity Fund (TER of 0.81%). This fund is now 2.5 years old and there is really still no useful data to show. In due time I will share of course.
You may read why.
Aberdeen Funds in Malaysia..Are They "Iron" Clad Investments?
Aboi To Finally Invest In Aberdeen Islamic World Equity Fund
Here's risk-adjusted returns measure using the five principles of risk measures; alpha, beta, r-squared, std deviation and Sharpe ratio. I will just explain what they represent rather than showing hefty equations.
Alpha: A +ve of 1.0 means the fund has outperform its benchmark index by 1.0%. The opposite goes for -ve.
Beta: A +ve of 1.2 means the fund is 20% more volatile than the index. The higher the beta suggest it offers the possibility of higher returns but also posing more risk. The opposite goes for -ve.
R-squared: A higher R-squared will indicate a more useful beta value (85 to 100) aka good correlation. A low R-squared value means you should ignore the beta. It's a measure on well the fund is measured against an appropriate benchmark.
Standard deviation: A large dispersion tells us how much the return on the fund is deviating from the expected normal returns.
Sharpe Ratio: The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been. It describes how much excess return you get for extra volatility you endure in holding riskier asset.
Immediately you will notice why I prefer Affin Hwang's Quantum over Eastspring Investments Small-cap. Sharpe ratios are similar but with Quantum's std dev at almost half of Small-cap's - less volatility. This explains why the Preservation rating of Small-cap is at an appalling 1 (it was 2 in 2H'2014). Nevertheless both are in different categories and they do excel at what they do. However I still cannot stomach such volatility and would certainly lean towards Quantum. Perhaps you can :)
Second. Long gone are the Sharpe ratios of 2+. The Malaysian market has plateaued with more downside risks than upside potential due to political uncertainties as well as weakening myr. I was right to ignore MY Focus due to the having highest Beta in 2H'2014 (30%) and now it's a whopping 40%! Equity income is still better - lower Beta and less Std Dev. My ratings still stand Kenanga Growth and Equity Income but I already have KGF so there is no need for me to increase my exposure to the lackluster Malaysia equities market.
I continue to hold my view that investing in Asia (exc Japan) is still the way to go. America's equities market has definitively peaked with US Fed interest rate rise looming in 2H'2015 (September maybe). Europe is still battling with Grexit but the contagion effect is limited as most investors have priced that risk in their purchases lately as evident from EU markets, they have not reacted like China's panic selling. From now on it is a lot more difficult to get the returns we once did during the bull run from 2009-2013. Do not expect record high returns. It is still best to hold cash and wait.
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My five rules of choosing funds:
[2] 4/5 of picks since being added in the four broad categories have since performed well (I won't say admirably given these bad times): Kenanga Growth, Select Opportunity, Eastspring Equity Income and Select Asia Quantum.
[3] The big let down was Hong Leong's Consumer (and now has a competitor Libra's Consumer and Leisure Asia). The fund's exposure to the Malaysian market is huge and consumer based stocks has suffered due to GST. Under flagged. Public's Far East Property did perform well but it only managed to return to its 2013 peak return level and the momentum has fallen. I maintain its under flagged rating. Thus I've temporarily removed Hong Leong Consumer & Public's Far East Property.
[4] As of this writing, I own Kenanga Growth Fund which has been performing above my expectation. Now the fund has a high level of cash 25-30% as such I expect it to wait for opportunities to accumulate during bad times.
[5] Remember that I shun Philip Master Equity Growth due to high TER (total expense ratio) of 4%. It has been performing abysmally; dropping from the top spot to the edge of #29.
[6] I also own Aberdeen Islamic World Equity Fund (TER of 0.81%). This fund is now 2.5 years old and there is really still no useful data to show. In due time I will share of course.
You may read why.
Aberdeen Funds in Malaysia..Are They "Iron" Clad Investments?
Aboi To Finally Invest In Aberdeen Islamic World Equity Fund
Here's risk-adjusted returns measure using the five principles of risk measures; alpha, beta, r-squared, std deviation and Sharpe ratio. I will just explain what they represent rather than showing hefty equations.
Alpha: A +ve of 1.0 means the fund has outperform its benchmark index by 1.0%. The opposite goes for -ve.
Beta: A +ve of 1.2 means the fund is 20% more volatile than the index. The higher the beta suggest it offers the possibility of higher returns but also posing more risk. The opposite goes for -ve.
R-squared: A higher R-squared will indicate a more useful beta value (85 to 100) aka good correlation. A low R-squared value means you should ignore the beta. It's a measure on well the fund is measured against an appropriate benchmark.
Standard deviation: A large dispersion tells us how much the return on the fund is deviating from the expected normal returns.
Sharpe Ratio: The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been. It describes how much excess return you get for extra volatility you endure in holding riskier asset.
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| Source: MorningStar - Rating & Risks section for respective fund |
Immediately you will notice why I prefer Affin Hwang's Quantum over Eastspring Investments Small-cap. Sharpe ratios are similar but with Quantum's std dev at almost half of Small-cap's - less volatility. This explains why the Preservation rating of Small-cap is at an appalling 1 (it was 2 in 2H'2014). Nevertheless both are in different categories and they do excel at what they do. However I still cannot stomach such volatility and would certainly lean towards Quantum. Perhaps you can :)
I continue to hold my view that investing in Asia (exc Japan) is still the way to go. America's equities market has definitively peaked with US Fed interest rate rise looming in 2H'2015 (September maybe). Europe is still battling with Grexit but the contagion effect is limited as most investors have priced that risk in their purchases lately as evident from EU markets, they have not reacted like China's panic selling. From now on it is a lot more difficult to get the returns we once did during the bull run from 2009-2013. Do not expect record high returns. It is still best to hold cash and wait.
***************************************************************
My five rules of choosing funds:
#1 Avoid choosing big sized popular funds!
#2 Compare fund expenses!
#3 Information on the fund manager!
#4 Good funds don't advertise.
#5 Avoid the usual past performance > riskiness of fund > manager's rep (some don't) > fund expenses > popularity of fund. Look from the opposite direction and do your filtering from there.
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.
#2 Compare fund expenses!
#3 Information on the fund manager!
#4 Good funds don't advertise.
#5 Avoid the usual past performance > riskiness of fund > manager's rep (some don't) > fund expenses > popularity of fund. Look from the opposite direction and do your filtering from there.
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.
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