The annual Morningstar Singapore Fund Awards are designed to help investors identify the retail funds and fund houses that added the most value for investors within the context of their relevant peer group in 2015 and over longer time periods.
To help our readers better observe what makes a winner fund house, we asked the winning teams to shed lights on how they take advantage of opportunities, the success factors in their corporate culture and future business plans, etc.
Best Fixed Income Fund House -- Fullerton Fund Management
M: Morningstar F: Fullerton Fund Management
M: What is your outlook for 2016 specific to the markets you cover and how are you positioned to take advantage of opportunities and/or mitigate potential risks?
F: Concerns about China’s currency and economy, falling oil prices, and tepid growth continue to put pressure on the global recovery. Consensus forecasts for global growth are now around 3%, following some downward revisions from financial institutions such as the International Monetary Fund, earlier this year. We think a fragile global economic recovery will remain in place, interspersed with frequent bouts of market volatility. The Fed is likely to maintain accommodative monetary policy and we anticipate USD strength to continue, even if the currency is no longer considered cheap.
Elsewhere, central banks in Japan, Europe and Asia are likely to take further policy actions to support their economies, in the form of further quantitative easing and interest rate cuts, which provides some support for risk assets.
In Asia, 2016 corporate earnings are currently forecasted to be in the mid-single digits. Asian economies which are able to boost fiscal spending and domestic demand will see better growth prospects. The resilience of domestic demand in the region, aided by falling energy prices, is helping to offset weaker exports. However, the correction in China has introduced an element of uncertainty to the Asian investment outlook. Further volatility in the currency is expected as it finds an equilibrium that more accurately reflects its fundamentals.
With the global economic environment expected to be challenging in 2016, stringent credit selection will be the key to delivering value, as volatility unmasks opportunities. Our Asian bond portfolios are invested in relatively high quality bonds with attractive valuations. In light of interest rate volatility, we maintain a shorter duration stance in these portfolios. As Asian investment specialists, we will continue to focus on in depth credit research to identify mispriced opportunities, paying careful attention to downside risks as well as upside potential.
M: Can you comment on the macro risks facing the global economy, including the US rate hikes, weaknesses in commodity prices and the significant headwinds facing the emerging world? How do these risks affect your investment decisions?
F: The fluctuation in commodity prices continues to weigh on sentiment, and markets are likely to remain news dependent. Overall, the significant weakness in oil has been driven primarily by supply side factors rather than a collapse in global demand. Should US data surprise on the upside, and with USD strength tapering in recent months, the bottoming of oil prices and lower base effects could lead to higher headline inflation.
From the perspective of US monetary policy, concerns over global disinflationary pressures and a fragile global economic outlook have led to a downward re-pricing of the Federal Reserve’s rate hike trajectory, with expectations for only one rate hike in 2017. While we still expect the Fed to continue with a gentle rate hike cycle, the trajectory for forthcoming rate hikes looks to be increasingly data-dependent, with the Fed acknowledging that US downside risks have risen amid slower global growth and a tightening in financial conditions.
We remain cognizant of the macro risks and fully anticipate that 2016 will be a challenging year for investors. In this environment we would rely on our careful credit selection and risk management to mitigate risks in client portfolios.
M: What do you think are the success factors in your corporate culture than enables your firm to consistently deliver for investors?
F: At Fullerton, we believe in active management and our ability to deliver consistent, repeatable investment performance.
We believe that alpha can be generated for our clients through:
- Our proximity to the investment universe;
- Our experienced gained over 20 years; and
- Our focus on solutions that meet client needs
We believe that quality, fundamental research at the individual security level underpins our view that investment in growth should be at a reasonable price. Being in the heart of Asia means we live and breathe the dynamism and vibrancy of the region. It underpins our fundamental researchprocess and informs our investmentphilosophy.
We believe that our institutional backing aids our entrepreneur-ship and agility of decision making. We’re owned by Temasek, and our parentage has given us important insights into the mindset of an institutional investor. In general, no external shareholders means that there is no short term decision making and no competing demands regarding share price or dividends. We can invest for the long term.
We believe that an alignment of interests across clients, staff and shareholder, is essential for delivering long term value to all stakeholders.
M: Can you share some of your future business plans with us, such as the launch of new products?
F: We plan to enter the Australian market, to capitalize on the potential demand for offshore funds. As Australian investors expand their investment horizon, they are likely to look to Asia. Fullerton, as an Asian investment specialist, stands to benefit. We will roll out a number of Asian funds (including fixed income), targeted at institutional clients, retail clients and self-managed superannuation funds. The funds will be made available via our distribution partners in Australia.
We have incubated a track record for our Asian high yield bond strategy, and intend to launch a total return driven product later this year.
In addition, we will also be launching a USD Income Fund*, which will invest primarily in a diversified portfolio of investment grade bonds and up to 30% in non-investment grade bonds. The Fund will be total return driven with the intention to declare dividends.
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