This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on March 14 - 20, 2016.

Kenanga Investors Bhd’s winning streak continued at The Edge-Thomson Reuters Lipper Fund Awards 2016. The Kenanga Growth fund outperformed other funds to win the award for Best Equity Malaysia in the 5 and 10-year categories.

Executive director and CEO Ismitz Matthew De Alwis attributes the wins to the fund house’s disciplined approach to research and bottom-up stock picking. This was underpinned by its value-based investment philosophy and the support of dynamic fund managers and analysts who are constantly on the lookout for market trends and stock ideas.

“We have been picking under-valued stocks with strong fundamentals and sustainable business models. We further intensified our in-house research by expanding our ‘radar’ beyond traditional market names and sectors in search of value stocks with superior earnings growth potential. We believe that as the market continues to evolve, so will the way we manage our funds. We need to continue to ‘out-think’ the market and stay ahead of the curve,” he says.

The biggest challenge faced by the fund house last year was managing the big swing in equity prices associated with various risk events. De Alwis says the ringgit’s 20% plunge reflected concerns about the falling oil prices and 1Malaysia Development Bhd’s debt issues heightened equity risk premiums as foreigners dumped local stocks. 

The team stuck to its bottom-up stock picking to weather the storm. “Throughout the year, we looked beyond the macro disturbances and focused on our bottom-up stock picking to deliver consistently positive returns in a falling market. Our flagship fund managed to deliver a return of 21% as we successfully picked plenty of benchmark bets and under-researched ideas, which gave us alpha performance. These companies are in various sectors of the economy, from technology, OEM and plastic packaging to glove makers, utilities, e-commerce, consumer and retail,” says De Alwis. 

He also says no significant rebalancing was done to the funds last year as the key fund managers remained intact and the investment style was unchanged. “We do not practise active asset rebalancing. Our bottom-up stock-picking strategy meant that we continued to stay invested as long as we found suitable and viable investment candidates that passed our stringent research criteria.”

Going forward, the fund house will continue to favour sectors with more resilient earnings such as utilities and, to a certain extent, infrastructure and construction, owing to the government’s pump-priming. “Exporters may still be good in the first half of the year, given the ringgit’s weakness, but we will be ready to look for sectors that will benefit from a reversal in trends. These companies, which have costs in the US dollar and revenue in the ringgit, will be the beneficiaries,” says De Alwis.