RHB Asset Management adopted a defensive positioning for its funds before the Covid-19 market crisis hit

By Lee Min Keong

Being able to identify very early on that the Covid-19 pandemic will change the world and create a ‘New Normal’ enabled RHB Asset Management Sdn Bhd (RHBAM) to adopt a defensive positioning and subsequently pick up quality blue chip stocks as the Covid-19 market crisis unfolded.

The strategic adjustments from late January onwards resulted in many of its funds safely navigating through the market downturn in March and outperform the FBM KLCI Index and other indices as the market recovered.

Eliza Ong Yin Suen, managing director/CEO, and head of RHB Group Asset Management confirmed most of its funds “performed strongly during MCO period” from 18 March 2020 up to 31 May 2020. “Our local funds performed better than FBM KLCI Index, and returned 20.8% over the same period.”

Eliza Ong Yin Suen, managing director/CEO, and head of RHB Group Asset Management confirmed most of its funds “performed strongly during MCO period” from 18 March 2020 up to 31 May 2020. 

“Our local funds performed better than FBM KLCI Index, and returned 20.8% over the same period.”

“Among the best performing funds are RHB Capital Fund, RHB Thematic Fund, RHB Small Cap Opportunity Fund, RHB Entrepreneur Fund and RHB Malaysia Diva Fund which delivered returns ranging between 23% to 60%,” says Ong (pic).

Its regional funds – RHB Big Cap China Fund, RHB Shariah Asia ex Japan Fund and RHB Multi Asset Regular Income Fund – out-performed during the market decline in first quarter of 2020 and also outperformed, with a wider variance, during the market rally in April and May, she adds.  

RHB Bond Fund, RHB Income Fund 2 and RHB Islamic Bond Fund stand at the top two quartiles year to date, with returns of 3.8%, 3.8% and 3.6% respectively, during the MCO period.

Under the global bond fund category, RHB Dynamic Bond Mandate Fund is also one of the top performing funds in that space, recording returns of 6.40%.

Ong says RHBAM also launched a new fund, RHB Malaysia Income Fund, in October 2019 with the main strategy of the fund focusing on low risk fixed income securities. “On the balance of risk taking, it has limited credit risk exposure and the fund outperformed fixed deposit rates with a return of 4.18% since its inception and had grown to a high of RM730 mil.” 

 Ong shares three key reasons for the sterling performance of its funds during a pandemic. 

#1. Early recognition of the seriousness of Covid-19
in late January 

RHBAM funds went into a defensive positioning earlier than most from late January onwards when it recognised that the Coronavirus situation was more serious than what the general market was expecting at that time. 

“We rotated into more defensive sectors and also held higher than normal levels of cash from late January onwards,” she says.

#2. Timely re-entry into the markets in late March 2020

When in late March, the markets across the world were in a wide-scale selling mode, RHBAM recognised the extremely attractive opportunities available, with quality blue chip companies across different countries and sectors trading at Asian Financial Crisis or Global Financial Crisis valuations.

“As such, from a defensive positioning, we moved into a more constructive mode in late March, and were able to accumulate a substantial positioning in quality stocks with good balance sheets in key structural growth sectors,” Ong explains.  

#3. Correct stock and sector allocation decisions 

Ong says RHBAM identified early on that the Covid-19 pandemic will change the world and create a ‘New Normal’. 

“As such, we identified and curated 12 important ‘Post Covid-19 - Work, Live and Play’ sub-themes that we believe will be key in the ‘New Normal’.  In addition, we also identified key category winners in each of these 12 key sub-themes through active stock picking and bottom-up research.  These 12 key sub-themes have proven to work well.”

She says while the mentioned funds above were not immune to the global sell-off in mid-March, which also coincided with the MCO period, the ability to dynamically asset allocate in these funds had resulted in the funds being nimble enough to stave off the overall market selloff by maintaining a fair allocation in liquid government securities and higher grade bonds or sukuks. 

“We also took profit on some of these positions when the bond market recovered and subsequently rallied,” she says, adding during the MCO period there were no large redemptions of its funds. 

However, she adds the volatility seen from the exponential growth of Covid-19 cases leading to most economies implementing some form of lockdown has seen some reallocation of risky assets into more defensive plays including cash and money market funds.

Moving forward, she says it will be a delicate balance between restarting economies and avoiding a second wave of Covid-19. “The lockdown was never intended to be permanent and the intent is to get ‘R’ down till we have a vaccine and eventually a herd immunity. Till we get there, a second wave or more is a clear danger. 

“New waves of infections would be a recurring theme adding volatility to the market. As life is likely to remain so for a while, it will change the pattern of human behaviour on how we work, live and play and thus create new future winners who can take advantage of this New Normal,” says Ong.


This article was published in the July/August issue of Smart Investor  

About RHB Asset Management Sdn Bhd

RHB Asset Management Sdn Bhd is a wholly-owned subsidiary of RHB Investment Bank Bhd. RHB Group Asset Management enjoys a significant presence in the Asean and Greater China region, with offices in Malaysia, Hong Kong, Indonesia, and Singapore. 

In Malaysia, RHB Group Asset Management remains as one of the top three fund management companies in terms of total assets under management (AUM), offering conventional and Islamic products.