This article first appeared in Wealth, The Edge Malaysia Weekly on March 28, 2022 - April 3, 2022

Manulife Investment Management (M) Bhd bagged a fund award at the Refinitiv Lipper Fund Awards 2022. Its Manulife Investment Shariah Progress Fund won the award for Best Equity Malaysia Diversified (Provident) in the 10-year category, when it achieved a cumulative return of 174.25% over the period.

Manulife Investment Management CEO Jason Chong attributes the win to the fund house’s focus on instilling investors’ confidence in its products by building a strong performance track record.

“We believe that investing in companies with solid and scalable business models, good earnings potential, steady cash flows, solid balance sheets and strong management teams will generate superior and sustainable returns to shareholders over time,” says Chong.

He adds that Manulife’s investment philosophy is premised on delivering returns based on an absolute return target over a three-year rolling period, through various market conditions (and not merely outperforming the benchmark). For this purpose, Chong says the fund house employs active management in their investment strategies.

He says the fund house invests based on fundamentals, as opposed to benchmarking their portfolios. “We are stock-pickers with a top-down overlay, where most of our effort is spent on identifying themes, sectors and stocks where excess returns can be derived.

“We focus on knowing our companies well, leveraging our in-depth understanding of markets and the business environment that these companies operate in. We identify mispricing as they occur and take advantage of them, regardless of whether the companies exhibit growth, value or defensive profiles.

“This approach enables us to extract alpha from different sources of market inefficiencies. Our approach to research and for portfolio construction is a ‘conviction-building’ process and structured to ensure that our bet size reflects the extent of our conviction for any given investment. Our long-term investment approach is derived by identifying multi-year themes and sector trends rather than a simple ‘buy and hold’ strategy.”

Chong says the biggest challenge that the Manulife team faced last year was market volatility and that the fund house employed tactical asset allocation to protect capital and as ammunition for bottom-fishing stocks.

“Owing to market volatility, our cash levels ranged from 10% to 25% during the year. We adopted a more tactical trading approach, given the market uncertainty, with a lot of rotational plays in the same sector, especially tech, as well as among different sectors.

“The fund relies primarily on stock picking to generate alpha. Market volatility also presented trading opportunities, such as the current selldown in the technology sector. There is still a lot of potential for the small-mid-cap space to outperform, as companies are less affected by the prosperity tax and have stronger earnings growth,” he says.

In addition, Chong says the Malaysian market was in a downward channel last year, owing to a series of negative news flows, such as the Movement Control Orders, political uncertainty and prosperity tax. On top of that, the country saw local institutional funds selling their assets to fund withdrawals, especially the Employees Provident Fund and the sharp reversal in the gloves sector.

Nevertheless, Chong says Manulife Investment Management managed to generate decent positive returns despite the negative performance of the FTSE Bursa Malaysia KLCI, as the fund house was overweight on technology, which he says had a few bright spots, and avoided gloves stocks.

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