This is the last update on Mutual Funds in Malaysia. Links to my first two:
Aboi's Updates For Malaysian Bond Mutual Funds for 1H'2016
Aboi's Updates For Malaysian Mixed Assets Mutual Funds for 1H'2016
Aboi's Updates For Malaysian Bond Mutual Funds for 1H'2016
Aboi's Updates For Malaysian Mixed Assets Mutual Funds for 1H'2016
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. |
[1] Again due to the nature of risk in equities the top rankings between 2H'2015 vs now is not close. Overall 2015 was a challenging market for Malaysia. 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; twice in fact and GST's impact).
[2] Only Estpring Small Cap and Kenanga GF performed well under stress which managed to eke out 11.76% and 6.55% returns. My other picks under Equity Asia Pacific ex Japan did not do well; not surprising due to Emerging Market outflows owing to stronger USD.
[3] As of this writing, I continue to own Kenanga Growth Fund (+64.89%, 3 years holding period) which has been performing above my expectation. Now the fund has a high level of cash 20% as such I expect it to wait for opportunities to accumulate during bad times.
[4] I also own Aberdeen Islamic World Equity Fund (+5.14%, 2 years holding period). This fund (TER of 1.31%) is now 3 years old and there is really still no useful data to show e.g. 5 years data. In due time I will share of course. However the fund did not do well this year as it's stock selection in the UK was a key detractor, led by Weir Group. The engineering services provider was hurt by the continued sell-off in the oil & gas sector.
I will continue to hold and weather the storm.
Aberdeen Funds in Malaysia..Are They "Iron" Clad Investments?
Aboi To Finally Invest In Aberdeen Islamic World Equity Fund
[5] Lastly I also own CIMB Principal PRS Plus Asia Pacific Ex Japan Equity Fund (+17.90%, 1.4 years holding period). This fund is a feeder fund and it feeds of CIMB Principal Asia Pacific Dynamic Income 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.
Now I have accepted the fact that Small Caps funds naturally have higher Std Dev due to their risk profile. This explains why the Preservation rating of Small-cap is lower around 1-3. By comparing Sharpe ratios the crown belongs to Eastspring Investments Small-cap though I must caution the degree of volatility +- 18.70%, question is can you stomach it?
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, weakening myr, GST's impact and low oil prices. My ratings still stand with 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 - LONG TERM. America's equities market is still not that cheap. The US Fed interest rate hike should be very gradual in 2016 which does not go well with equities. Europe is now battling with Brexit so the market will have some noise in 1H'2016. China is reforming its economy to be more inward, they will need more time to reform their financial sector. From now on it is a lot more difficult to get the returns we once did during the bull run from 2009-2013. I do not expect record high returns. It is still best to hold cash and wait. Feng Shui says something bad will happen in April 2016 all the way to early July.
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My five rules of choosing funds:
[2] Only Estpring Small Cap and Kenanga GF performed well under stress which managed to eke out 11.76% and 6.55% returns. My other picks under Equity Asia Pacific ex Japan did not do well; not surprising due to Emerging Market outflows owing to stronger USD.
[3] As of this writing, I continue to own Kenanga Growth Fund (+64.89%, 3 years holding period) which has been performing above my expectation. Now the fund has a high level of cash 20% as such I expect it to wait for opportunities to accumulate during bad times.
I will continue to hold and weather the storm.
Aberdeen Funds in Malaysia..Are They "Iron" Clad Investments?
Aboi To Finally Invest In Aberdeen Islamic World Equity Fund
[5] Lastly I also own CIMB Principal PRS Plus Asia Pacific Ex Japan Equity Fund (+17.90%, 1.4 years holding period). This fund is a feeder fund and it feeds of CIMB Principal Asia Pacific Dynamic Income 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 |
Now I have accepted the fact that Small Caps funds naturally have higher Std Dev due to their risk profile. This explains why the Preservation rating of Small-cap is lower around 1-3. By comparing Sharpe ratios the crown belongs to Eastspring Investments Small-cap though I must caution the degree of volatility +- 18.70%, question is can you stomach it?
I continue to hold my view that investing in Asia (exc Japan) is still the way to go - LONG TERM. America's equities market is still not that cheap. The US Fed interest rate hike should be very gradual in 2016 which does not go well with equities. Europe is now battling with Brexit so the market will have some noise in 1H'2016. China is reforming its economy to be more inward, they will need more time to reform their financial sector. From now on it is a lot more difficult to get the returns we once did during the bull run from 2009-2013. I do not expect record high returns. It is still best to hold cash and wait. Feng Shui says something bad will happen in April 2016 all the way to early July.
***************************************************************
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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