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

Once again, Public Mutual Bhd dominated the Refinitiv Lipper Fund Awards, this time by bagging 32 awards — Best Equity Group (Malaysia), Best Mixed Assets Group (Islamic) and 30 fund awards. It extended its winning streak to four years in a row by outperforming its peers in various categories.

The firm’s 11 award-winning equity funds are Public Emerging Opportunities, Public Islamic Opportunities, PB Islamic SmallCap, Public Islamic Savings, Public Islamic ASEAN Growth, PB China Pacific Equity, Public Far East Dividend, Public Lifestyle & Technology, PB Islamic Asia Strategic Sector, PB Global Equity and Public Islamic Global Equity.

Meanwhile, its eight award-winning mixed-asset funds are PB Dynamic Allocation, Public e-Flexi Allocation, Public Ehsan Mixed Asset Conservative, Public Enhanced Bond, Public Growth Balanced, Public Islamic Asia Tactical Allocation, Public Strategic Balanced and Public Tactical Allocation.

“We are deeply honoured to have been conferred [the most awards at] the Refinitiv Lipper Fund Awards this year. We want to attribute this win to our unitholders, as well as our unit trust consultants for giving us their unwavering support and trust,” says Public Mutual CEO Yeoh Kim Hong.

She attributes the wins to the fundamental research and analysis that form the core of the firm’s investment philosophy. Its investment strategy, which takes a long-term view on investing and focuses on companies with sustained earnings, strong financial positions and a proven track record, is another key to its outperformance.

“We were also cognisant of the changing trends in the respective markets, sectors and industries that we invested in. We rebalanced our portfolios accordingly to navigate the challenging market conditions in 2021.”

The healthcare and technology sectors were the two main contributors to the performance of Public Mutual’s funds last year. “Our domestic equity funds locked in profits from selected healthcare stocks whose prices looked to have peaked post the initial Covid-19 outbreak. We then focused on selected technology companies, which are expected to benefit from the long-term structural digitalisation trend,” says Yeoh.

Its domestic fund managers also increased the exposure to companies poised to benefit from the reopening of the local economy. “These companies stood to benefit from the recovery in economic activities amid the progressive rollout of vaccinations and lifting of movement restrictions,” she adds.

On the regional funds, the firm was affected by regulatory changes implemented by the Chinese government last year. Specific sectors such as the internet, technology, education and real estate were at the forefront of the Chinese government’s regulatory crackdown. The pent-up consumer demand in the country and supply chain issues across various sectors, particularly the semiconductor space, also posed challenges to the firm.

“However, we remained vigilant in monitoring these risks. That helped us to identify companies that were beneficiaries of the resulting price hikes for certain basic materials that were still high in demand. Investing in those companies allowed us to mitigate the impact from companies whose prices were adversely affected by the regulatory crackdown,” says Yeoh.

Globally, the firm faced challenges in making investment decisions due to the resurgence of Covid-19 cases and the emergence of new variants of the virus. Its fund managers were uncertain whether the global economy would remain open or face another lockdown.

“Still, we focused our investments on companies with strong balance sheets that are capable of weathering the volatile economic conditions,” says Yeoh, adding that the firm also rebalanced its global portfolio into sectors that stand to benefit from an economic upcycle, including financial and energy.

On the local front, the significant rise in local bond yields last year was a critical challenge to the firm’s fixed-income team. That was happening as investors globally expected major central banks to normalise interest rates on the back of an improved global growth outlook and rising inflationary pressure. “As a result, we adopted a shorter portfolio duration and focused on high-quality bonds with attractive yields,” she says.

Moving forward, Public Mutual expects a broader economic recovery, barring any unforeseen circumstances. The reopening of economies, supported by higher vaccination coverage, should benefit financial, energy, commodity, discretionary consumer and leisure stocks.

“Our equity fund will continue to focus on selected recovery plays within the financial, services and consumer sectors, which are expected to benefit from the gradual lifting of pandemic restrictions. We will also look at selectively investing in technology and semiconductor stocks that are poised to benefit from the digitalisation trends,” says Yeoh.

“Companies in the electric vehicle and renewable energy sectors can benefit from the increased focus on clean energy solutions worldwide.”

However, the outlook for the equity market is likely to remain challenging this year, given the increased valuation in various stock markets and the tightening monetary policy observed around the world. Stock and sector selection will determine the success of investors in 2022, says Yeoh.

On fixed income, the firm believes that the global bond market has moved ahead to price in monetary policy normalisation. As local bond yields inched higher to reach attractive levels, foreign and domestic institutional investors could start to turn their attention towards the Malaysian bond market.

“Therefore, our fixed-income portfolios will continue to focus on high-quality corporate bonds, primarily in the banking, telecommunications and infrastructure sectors,” she says.

Key risks this year include the ongoing pandemic and high inflation exacerbated by the conflict between Ukraine and Russia, says Yeoh.

“While symptoms of the Omicron variant are less severe than that of Alpha and Delta, the healthcare systems of several countries continue to be overwhelmed by patients who require treatment in hospitals.

“The number of people infected by the virus has begun to decline, but it is still hard to tell whether a new variant will emerge. We can’t know how close we are to the end of the pandemic.”

Meanwhile, high inflation worldwide could persist longer than the market expects, prompting central banks to hike interest rates to relatively high levels. A sharp increase in interest rates could weigh on global economic growth and markets.

“It is unlikely that the world is entering a new inflationary paradigm, but it remains debatable how much longer the supply chain bottleneck and higher energy and commodity prices will persist,” says Yeoh.

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