TheStar
They delivered positive returns over one year till Oct 31
PETALING JAYA: Money market-linked funds registered for sale in Malaysia were the best-performing asset type in comparison with commodity and equity funds for the year ended Oct 31, according to data provider Morningstar Asia Ltd.
On average, money market funds delivered positive returns (2.19%) over the period compared with commodity and equity-linked funds, which registered negative returns.
Morningstar told StarBiz that as a result of the uncertain global economic climate, investor risk appetites had been sharply reduced.
Higher-risk asset classes, such as equities and commodities, typically performed poorly in such an environment, while perceived safe harbours – such as money market linked-funds – generally did better, Morningstar added.
However, it must be noted that in the preceding year, commodity funds posted impressive performances with an average return of 70.61%, followed by equity-linked funds (41.53%) in comparison with money market funds (2.81%), according to Morningstar.
According to OSK-UOB Unit Trust Management Bhd, the fund manager of OSK UOB Money Market (the best performing money market-linked fund over the past one year), the fund had invested in short-term Islamic commercial papers and placed short-term syariah-based deposits with financial institutions to preserve capital and to generate consistent income streams.
The fund manager said it focused more on high-quality short-term corporate securities to limit credit and duration risks.
In the first quarter of 2008, the fund capitalised most of its profits when short-term government sukuk traded below overnight policy rate of 3.5% amid strong demand from offshore investors, it added.
“Subsequently, we adopted a more cautious approach given the increased market volatility amid heightened inflationary pressures and political uncertainties,” it said.
Meanwhile, fund manager Meridien Asset Management Sdn Bhd chief executive officer and managing director Nicholas Ng said its MAAKL Money Market Fund, another top-performing money market-linked fund, had consistently focused on commercial papers with top credit quality, hence sheltering it from the volatility associated with the bond market.
To further fortify itself, the fund decided to cease investments in short-term bonds, even though in the past it had prudently limited its short-term bond exposure to AAA credit ratings with less than six months’ duration and no more than 10% of its fund size.
Ng said he expected stability to continue in the money market, given the recent steps taken by Bank Negara to strengthen confidence in the financial system.
Going forward, the fund manager for OSK-UOB Unit Trust said the US financial turmoil would pose volatility and bode well for risk-aversion investment, namely money market-linked funds.
Also, current account surplus and ample liquidity in the banking system should continue to provide support for the money market, he added.
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