The investment landscape in Malaysia has changed drastically over the past decade and a half. Not only has the industry boomed, it also has evolved from a restricted market to a diverse and deep one. , one of the most prominent funds management houses in the country, was founded over 30 years ago, and seemingly a world away.
“In the 1980s, the landscape was dominated by less than a handful of fund managers who were merely little units or departments within merchant banks. Their clients were a handful of government pensions and pilgrimage funds or insurance companies at best,” explains Maznah Mahbob, CEO of AmInvest. “These investments would focus only on domestic equities for want of other instruments. It was quite a primitive landscape.
“But now it’s totally changed, the universe has grown, the asset classes are more diverse. Not just domestic equities – we now have a whole new asset class of bonds. Now Malaysia has one of the deepest bond markets in Asia, and the most liquid. The assets managed by the managed fund industry have grown accordingly.”
Today, Malaysia is a country on the rise. Its economy is growing and developing fast, and with it the market for investment banking. Investment managers in the country are no longer restricted to selling only Malaysian assets and are expanding their portfolios with Asian and Southeast Asian assets. In this regard, AmInvest has also been a pioneer. “We are one of very few Malaysian companies that can manage more than just Malaysian assets, especially in terms of our sharia-compliant investments. This is because our global sukuk go beyond Asia, and we manage a number of global sharia-compliant equities beyond Asia as well,” says Mahbob. “We have also been given a global bond mandate by a large pension fund. So you can really see the difference in asset classes.”
The market segments for investors have also changed dramatically; today there is a wide segment for retail investors, where before the market was dominated by a handful of institutions. A number of foreign banks have branched out to Malaysia and now offer a wide variety of retail funds, domestic and foreign. For Mahbob “Malaysia today is a much more diverse, much more competitive and much broader market in depth and scope.”
A developing market
But to assume that this development has been easy and straightforward would be a mistake. According to Mahbob the trigger for change in the market was actually the Asian crisis that struck the economies in the continent in the late 90s. The so-called ‘Asian contagion’ caused a series of currency devaluations that spread across Asia, and was only stemmed when the IMF intervened. While the rest of the financial market was in turmoil, AmInvest saw an opportunity. “If you think about it, it was the perfect time because interest rates were very high. And there was only one way to go: recovery. There were lots of bond rallies subsequently, and lots of opportunities,” says Mahbob.
“If you look at it retrospectively, we began like everybody else, with domestic equities. But we led the change in the market to bonds. We began offering bonds and fixed-income investments across the whole spectrum, from cash money markets, short- and long-term bonds, and dynamic bonds. We began offering these products from the onset of the Asian crisis in 1998,” says Mahbob. “AmInvest grew to be the largest bond manager in Malaysia as a result of those opportunities. Our asset class changed from 100 percent equities before to 80 percent bonds presently. Bonds have been the fastest-growing segment in Malaysia in the past 15 years, from a zero base, and we were at the forefront of that growth.”
Another pivotal change came in 2006 when Malaysian regulators started opening up the market, after years of capital controls instituted during the Asian crisis. The local funds management industry has benefited tremendously from liberalisation and was finally given the opportunity to grow and flourish as a growth market in its own right.
For AmInvest, it was the final push to huge success. “In 2006 there was a liberalisation. Regulators started to allow fund managers to offer non-Malaysian asset classes. We were also pioneers in this field, because we immediately started offering a whole spectrum of asset classes to retail investors through partnerships with international fund managers, which we chose on a best-of-breed basis. We specifically chose asset classes that had low correlations with Malaysian asset classes,” says Mahbob.
Ingenuity in sharia-compliant investments
Today, AmInvest is a market leader in bonds in Malaysia, but its global sharia-compliant investment segment has really boomed recently. Sharia-compliant investment is a growth segment in the global investment market and there is still a lot of room for growth and innovation. Because there are limits in terms of risk available for sharia- compliant funds, companies like AmInvest use their considerable size and expertise to innovate and guarantee steady and superior returns. “We manage our sharia-compliant assets leveraging on our shared services resources within AmInvest, in terms of the operational support, research and the whole infrastructure. As such we are able to provide greater innovation,” explains Mahbob. “A lot of sharia-compliant funds management companies that don’t have this support platform could struggle in their nascent stage. In funds management you need economies of scale and you need that holding power to innovate and persevere before the business gets to a tipping point. There will always be the trough of the early years. So we have a whole funds management platform to support the commitment in the sharia-compliant funds segment.”
For AmInvest, innovation is a vital part of responding to, and anticipating, what their clients want. When it comes to sharia-compliant investments, investors want similar returns to non-sharia-compliant funds, and it takes a significant amount of ingenuity from the AmInvest team.
AmInvest continues to build on its reputation and success, in both sharia-compliant and conventional investments. The company is growing faster than the Malaysian industry in term of market share – “without sacrificing profitability”, Mahbob adds. It has been averaging a 21 percent growth in assets under management (AUM) per annum for the past 10 years. It is now the largest bond house in Malaysia and continues to grow.
“We have actually seen the fastest growth in the equities segment, which increased 44 percent for the one-year period as at 31 May 2013,” says Mahbob. This bodes very well for AmInvest as the company continues to strive to diversify its profile. “Asian bonds, in particular, are important to us,” she continues. “We are leveraging on our robust credit risk framework, which is very important in bonds; when you are chasing opportunities in emerging markets, credit is paramount. We are very rigorous because we cannot afford to make mistakes as we also invest in local currency bonds. This means we invest a lot in on-the-ground primary research. We carry out extensive research and our people are travelling, going to see bond issuers and companies for equities investments; we are not just an armchair funds management house.”
Because of its enduring success, AmInvest has been investing in developing its own brand and team. For Mahbob, this is the key thing that sets the company apart from competitors. “In addition to our active funds management team – comprising 27 in our bond team and 19 in our equities team – we are the only funds management house in Malaysia with a team of more than 10 taking care of quantitative management. We utilise this to develop more quantitative and smart beta strategies across global equities.
“Because of our internationalisation in terms of asset classes and customer base, we have a significant expansion of talent,” she adds. “We are expanding our team, and the profile of our managers is also evolving to reflect this internationalisation. Compared to other companies in Malaysia we have great diversity in terms of age, gender, nationality and expertise. That adds to our ethos.”
In the past 16 months, AmInvest has picked up 23 awards for its achievements. And Mahbob is adamant that this is only the beginning.