Malaysian fund house CIMB-Principal has moved to bring multi-asset exposure to local clients by launching a feeder fund investing into a global product managed by Schroders.
The firm, winner of AsianInvestor’s Asian fund house of the year in 2013, says it is seeking to capitalise on the low interest-rate environment, with Malaysian fixed deposits yielding 3-3.5%.
It aims to raise RM300 million ($91 million) for this fund by the end of fiscal 2014, says Munirah Khairuddin, who became CEO last August amid a reshuffle seen as an indicator of its regional ambitions, as reported.
Launched yesterday, the CIMB-Principal Global Multi Asset Income Fund targets a 5% yield payable on a quarterly basis, largely by investing in high-yielding dividend stocks, investment-grade credit and high-grade credit globally.
The firm sees positive momentum in US high-yield on the back of American economic recovery and in European investment-grade bonds on expectations the European Central Bank will continue to be accommodative.
The fund invests at least 95% of its net asset value in the Schroder International Selection Fund Global Multi Asset Income, a Sicav fund established in April 2012 domiciled in Luxemburg. Up to 5% of NAV will be maintained in liquid assets.
Schroder’s product is managed by Aymeric Forest and Iain Cunningham and has $4.25 billion in AUM. It has achieved a 4.9% yield against an annual 5% target and runs a dynamic asset allocation strategy.
The fund has a 33% exposure to North America, 23% to Europe ex-UK and 19% to the UK. Its exposure to emerging markets is 18%, to Asia Pacific ex-Japan 6% and just over 1% to Japan.
Forest has previously told AsianInvestor he sees multi-asset income as key to fulfilling post-retirement needs. He noted multi-asset covers a range, from capital preservation, risk-controlled growth, income, inflation protection and risk mitigation. “From this angle we believe we will see continuous appetite,” he said.
By Morningstar data, global allocation products with a flexible allocation mandate saw assets grow 0.9% in 2011, 17.8% in 2012 and 11.7% in the first half of last year, to stand at $846 billion now.
But questions have been raised over the sustainability of the strategy. The build-up in multi-asset took place against a backdrop of a fixed income bull market. If interest rates go up in the US, as was presaged by the US Federal Reserve this week, this could cause major losses to bond funds, and therefore to multi-asset strategies.
If equities come to dominate investor flows in the short term as fixed income markets ‘normalise’, that would also trample over the diversification benefits of multi-asset funds.
Last November, AsianInvestor reported that Schroders had re-opened its Asian asset income fund in Hong Kong after a drop-off in assets.
The fund launched in June 2011 and at its peak attracted about $6 billion, but by September 30 last year assets had fallen to $3.5 billion. Performance has also been mixed: in 2011 it lost -7.3%, in 2012 it gained +26.1% and last year +0.8%.
As at February 28, CIMB-Principal has RM48 billion ($14.5 billion) in AUM. It manages 59 retail unit trust funds of which 21 are sharia-compliant, 12 wholesale funds, 10 private retirement scheme funds and two exchange-traded funds.