To achieve consistent capital appreciation over medium to long-term by investing mainly in listed Malaysian companies with good growth prospects.
Equity Fund EPF – MIS
07 September 2001
The Fund may be suitable for investors who:
are risk tolerant; and
are seeking higher returns for their investments over medium to long-term horizon.
The Fund will focus on achieving its objective by investing in a diversified portfolio consisting a minimum 70% of the Fund’s NAV in equities and a maximum 30% of the Fund’s NAV in debentures, money market instruments and/or deposits.
As the Fund holds a domestic focus, we will maintain a minimum 70% of the Fund’s investment into the domestic market, and hold a flexibility to invest up to 30% of its NAV in investments listed/issued in foreign markets.
The investment selection process will be focused on companies that are able to provide growth potential over the medium to longer term investment horizon. As such, we would adopt a top-down and bottom-up strategy investment approach to identify investment opportunities in the prevailing market. Fundamental analysis will also be carried out to determine the attractiveness of investment ideas. Key factors which are useful in identification of such companies would include sales and profit growth, financial strength and gearing levels, expected future earnings growth, share price valuation as well as management quality.
While the Fund’s core investments will remain in equities, the Fund holds the option to invest into fixed income instruments such as debentures, money market instruments and deposits. The selection of fixed income instrument will not be constrained by credit ratings of issuances. However, the selection will depend largely on its credit quality where the respective issuers display strong ability to meet their financial obligations, healthy cash-flow, the collateral type, value, claims priority as well as offer highest safety for timely payment of interest and principal.
We typically take an active trading policy where we look to maintain some core holdings that are held over the medium to long term which is similar to a buy and hold strategy. We will also maintain a trading portion for the portfolio, which we use to take advantage by participating in investment opportunities that are set to benefit from prevailing market conditions, with the aim of boosting the Fund’s performance.
To achieve its objective, the Fund will also have the flexibility to hold exposure in warrants as well as collective investment schemes that have similar investment objective to the Fund.
The Fund may invest up to 30% of its NAV in investments listed or issued in foreign markets. The decision to invest into foreign markets will opportunistically driven where we would seek out investments that could provide a potential to enhance the returns of the Fund. The Fund will invest only into countries where the regulatory authorities are ordinary or associate members of the International Organization of Securities Commissions (IOSCO).
Derivative trades may be carried out for hedging purposes, through financial instruments including, but not limited to, forward contracts, future contracts and swaps. Future and forward contracts are generally contracts between two parties to trade an asset at an agreed price on a pre-determined future date. Swaps, whereas, is an agreement to swap or exchange two financial instruments between two parties.
The intention of hedging is to protect the value of the asset from any adverse price movements. For example, to hedge against foreign currency exchange risk, the Fund may enter into a currency forward contract to offset any adverse foreign currency movements by determining an agreed rate for an agreed tenure with its counterparty. While these hedging transactions would protect the Fund against potential losses, trades for hedging purposes would also limit the returns that the Fund may have potentially received from foreign exchange gains would the Fund not have hedged its foreign currency exposure.
Temporary Defensive Position
We hold the option to take temporary defensive positions that may be inconsistent with the Fund’s principal strategy and asset allocation to protect the Fund against adverse market conditions that may impact financial markets. To manage the risk of the Fund, we may shift the Fund’s focus and hold a higher exposure into lower risk investments such as market instruments and/or deposits.