Investment Philosophy

The External Investment Managers’ main philosophy is to structure a concentrated and focused portfolio through strategic overweighing in investments which are likely to generate above average returns and avoiding those with unclear fundamentals in the medium term.

RHB Investment Management Sdn Bhd (RHBIM)

RHBIM’s investment philosophy incorporates prudence, flexibility, a disciplined approach, a sound structure of risk management within the framework of risk tolerance and legal constraints governing the Funds’ portfolios.

The designated Investment Managers operate within very disciplined investment guidelines and are accorded the flexibility to use their seasoned judgement when the occasion calls for fast decisions

UOB-OSK Asset Management Sdn Bhd (UOB- OSKAM)

UOB-OSKAM believes that prices of securities are ultimately determined by fundamental factors, and superior long term investment performance can be achieved by exploiting inefficiencies in the capital market through rigorous and intensive research.

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Investment Strategy

RHB Investment Management Sdn Bhd (RHBIM)

RHBIM operates on a combination of top-down and bottom-up approach based on in-depth economic researches and market valuation criteria. The formulation of the Investment Strategy has been based on the Investment Objective of the Funds and after taking into consideration the risks associated to the Funds. However the Investment Committee shall have the discretion to amend the Investment Strategy as and when appropriate.

• Equity

Typically, in the case of Equity and Balanced Funds, portfolio turnover rates are low.  Excessive portfolio turnover rates are generally not common to RHBIM’s Investment Strategy. For the Funds, the general Investment Strategy in terms of an equity portfolio is diversifying investment holdings within the Investment Restrictions of the particular Fund.

For investment in bonds, the Investment Strategy is diversifying investment holdings and spreading the maturity of bonds to ensure minimisation of risks. Investments in fixed income securities shall be on instruments that have potential yields above 3 months Kuala Lumpur Inter-Bank Offer Rates (KLIBOR).  Moreover, to minimise the credit, interest rate and issuer risks, RHBIM shall ensure that investment in fixed income securities straddle over a period of time sufficiently to cover short, medium and long term maturity. Investments in unlisted securities shall be confined to fixed income securities and the Investment Strategy would be as above. Any investment in foreign securities, whether in equities or bonds, would be diversified within the Investment Restrictions approved for the particular Fund.  The Funds would maintain small holdings of foreign stocks, in different countries to minimise the country risk. UOB-OSKAM

UOB-OSKAM believes that the greatest value is added through the exploitation of pricing inefficiencies, both in the short and the long term.  What UOB-OSKAM seeks are quality companies at a reasonable price.  Its investment process is structured and disciplined to ensure consistency.  Risk management is active.

Quality and value are its key criteria and UOB-OSKAM seeks companies where both sets of characteristics are found:-

Key quality characteristics of a company are:-

• shareholder value oriented; high standards of corporate governance;strong business franchises with discernible competitive advantages; and
• high cash flow generation.

Other characteristics of quality include:-

• sound track record of management capability; good capital management judicious use of leverage, consistent with the underlying operating cash generation rate business; high operating returns on capital employed; high return on assets, return on equities and return on investments measures versus peers are key considerations; and
• non-volatile earnings.

Key value characteristics of a company are:-

• reasonably priced against its intrinsic value; and
• ability to deliver long term returns of at least 15%.
• Fixed Income Securities

UOB-OSKAM looks towards multiple sources for adding value.  From the top-down perspective, it looks at duration, volatility, sector and yield curve.  From bottom-up perspective, it looks at credit analysis, issues selection and market timing. The main focus is on identifying long term trends by looking at secular considerations such as demographics, political factors, and structural changes in the domestic and international economy that can exert powerful, sustained influence on interest rates.  The longer term secular outlook then determines a general maturity/duration range for the portfolio in relation to the market.  In the short term, cyclical economic considerations will then determine shifts within this range.

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Investment Process

A highly disciplined investment process is adopted to ensure the active involvement of the Investment Committee, the External Investment Manager and the Manager, all working together to achieve the Funds’ Investment Objective.

The Investment Process in the management of a unit trust portfolio involves the following: -

	setting up of Investment Objective;
	establishing an Investment Policy;
	selecting an Investment Strategy;
	asset allocation;
	stock selections; and
	measuring and evaluating performance.

The Investment Committee is responsible for setting up the Investment Objective, Policy and Strategy of the Funds.  It will retain broad discretionary authority over the investments of the Funds.  The Investment Committee will also oversee the activities of the External Investment Managers who are responsible for research, stock recommendation and asset allocation. The External Investment Managers shall be responsible, as advised by the Investment Committee, to recommend allocation of asset type for the Funds. The External Investment Managers shall monitor and review regularly at the Investment Committee meeting to ensure that all of the Funds’ Investment Objectives are consistently met. The External Investment Managers recognise the problem on liquidity risks associated with large redemptions from Unit holders.  Hence, every precaution is taken and monitored at the Investment Committee meeting on monthly basis.  This is to ensure that any redemption from Unit holders is adequately met.  In the event if the redemption amount exceeded the cash holding of the Fund, the External Investment Managers, subject to the approval from the Trustee, will liquidate some assets from the Fund's investment to accommodate such redemption.

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INVESTMENT MANAGEMENT OF THE FUNDS INVESTMENT POLICY

The main objective of the Investment Policy is to implement a plan of action to achieve the highest probability of investment return from the Funds’ portfolios of securities.  The Investment Policy takes into consideration the direct correlation between risk and return for any investment alternative.  The Investment Policy requires the Investment Committee to:

	employ strategies for maximum capital protection through diversification and risk acceptance strategies for optimal return on investment;
	oversee the asset allocation between various forms of investments made to meet the Investment Objectives of the Fund;
	review and change the asset allocation at any time in response to changes in interest rates, indicative rates for Shariah compliant debt securities, economic and stock market conditions; and
	review the investment results on a monthly basis against the performance of benchmark indices.  Results will be evaluated on a total rate of return basis. The Investment Committee also evaluates the Funds for compliance with their specific Investment Objectives.

The Investment Policy above applies to all the Funds and may be varied by the Investment Committee from time to time with the knowledge of the Trustee. Depending on the prevailing circumstances, the respective Funds will adopt a suitable level of activeness and frequency in trading for the purpose of meeting the respective Funds’ objective.

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