KUALA LUMPUR – Affin Hwang Asset Management Berhad (“Affin Hwang AM” or “the Company”) announced today the launch of the 18M Enhanced Income Fund 1 (“18M EIF1” or the “Fund”). The Fund is the first tranche of the Enhanced Income Fund Series which is a wholesale close-ended fixed income fund that aims to provide income return whilst maintaining capital preservation.
To achieve its investment objective, the Fund will invest a minimum of 90% of the Fund’s NAV in Defensive Assets including money market instruments or deposits, and a maximum of 10% of the Fund’s NAV in Active Assets such as options or structured warrants.
Structured as a fund-linked product, the Fund grants downside risk protection to investors through its backing of defensive assets, as well as offers greater upside participation by enhancing returns through a participation rate(1) that makes reference to a global fixed income strategy that provides broad-based income derived from multiple sources.
Chan Ai Mei, Chief Marketing & Distribution Officer of Affin Hwang AM said, “As we enter the early-stages of a rising interest rate environment, there is an increased demand for fixed income products that provide higher returns to investors. The chase for yield continues in spite of a rising rate cycle, as investors seek income-generating opportunities to put their money to work and hunt for attractive yield levels. The Fund will fulfil this insatiable appetite for yield to enhance returns by allowing investors to participate in the fund’s structure, but without sacrificing capital preservation.”
“With over 90% of the Fund’s composition in defensive assets, capital preservation can be achieved from the interest income earned from this asset class. At the same time, investors are provided certainty of tenure to better manage their wealth and liquidity,” Ai Mei said.
On risk appetite of investors post-election Ai Mei adds, “Markets have been well behaved and largely stayed resilient since the election outcome. We have not seen any large redemptions across our retail or wholesale funds including those that are domestically-focused. We believe as the electorate matures, so have investors who are now taking a longer-term view of markets and are willing to overlook short-term volatility to seize opportunities.”
As illustration of the Fund’s performance, assume that the price of the underlying asset increases from 100 to 105 at the maturity date which is equivalent to a 5% gain during the period. Guided by an indicative participation rate of 2.0 times or 200%, the distribution payoff of the Fund at maturity doubles to 10%, as the 5% return of the underlying asset is increased proportionally by the participation rate.
On the flipside, if the price of the underlying asset suffers from a decrease in value from 100 to 98 at the maturity date, which is a loss of 2% during the period – the distribution payoff at maturity will be zero and is not compounded by the participation rate. Investors will recover their principal amount upon maturity (2), as the maximum loss that the Fund’s unitholders will incur is zero if the underlying asset’s performance over the period is negative.
The Fund is available to Sophisticated Investors who seek capital preservation, have a short-term investment horizon (i.e. 18 months) and are risk averse. The Fund is available for subscription for a period of not more than 45 days from the Commencement Date of the Fund, which is on 16 May 2018. The initial offer price is RM1.00 per unit, with a minimum initial investment amount of RM10,000.
Investors are advised to read and understand the contents of the Fund’s Product Highlights Sheet and Information Memorandum dated 16 May 2018 before investing. Investors who are keen to learn more about the Fund can visit https://affinhwangam.com/, and invest through any of Affin Hwang AM sales offices.
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