Overcoming the rising interest rates and weakening credit profile
Syhiful Zamri: Thank you for honouring MAMG Global Income-I Fund as one of the selected award-winning funds. We are humbled by this achievement as a reflection of recognition from industry peers. The Fund is a unique feeder fund, where it feeds into a target fund AZ Islamic – MAMG Global Sukuk, which is co-managed by Azimut Investments S.A. and our Maybank Asset Management Group’s investment teams.
It combines the best of each team’s experience and geographical expertise when it comes to credit selection for the target fund. Thus, MAMG’s team focus was on Asia sukuks while Azimut’s team focused on global sukuk outside Asia, mainly the MENA (Middle East North Africa) region.
Though we are committed to a semi-annual distribution to reflect the regular income distribution strategy as per the fund name suggests, currently the fund is distributed on a quarterly basis to match the consistent quarterly distribution by the target fund.
SI: What are the challenges you faced in the past 12 months?
SZ: The main challenges over the past year would be the rising interest rates environment and weakening credit profile of some of the high-yield sukuks due to the prolonged COVID-19 pandemic and economic recovery.
Aggressive upward interest rate adjustments by the central bankers reduced the price of sukuks massively, while credit downgrades or default on certain weaker credits will have a more permanent devaluation of the sukuks.
SI: What are the market trends that an investor should look out for in the near future?
SZ: For fixed income or sukuk investors, they should be mindful that the current high volatility may not last long as the central banks have already started their aggressive interest rate hiking action. Therefore, we think that most of the hawkish posturing by the central banks have been
priced in, especially when some of the treasury yields are already above recent year’s pre- pandemic highs.
Hence, we should be on the lookout for potential recovery options in the fixed income or sukuk market when the central banks start to become less hawkish due to the potential economic slowdown in the coming months.