Local funds should diversify portfolio

KUALA LUMPUR: Malaysian institutional funds should take the opportunity to diversify their portfolios now as they are insulated to a certain extent from events in global markets, according to global financial consulting firm Watson Wyatt.

Its Asean practice leader for investment consulting Puah Ser Sze said a few things could happen with local funds under current extreme global market conditions, especially since their investments were mainly domestic.

“I hope funds will go with the first route by introducing diversity into their portfolio. This is what we have been encouraging our clients to do,” she said in a statement.

Puah Ser Sze

Watson Wyatt’s global practice director for investment consulting Carl Hess said good invesment managers should already be taking advantage of undervalued securities with prices that had been depressed through panicked selling.

“We are likely to see buying opportunities for funds that can identify them and move quickly enough to take advantage of them,” he said.

“One action they really should take now is to assess whether they or their delegates are well placed to seize that advantage,” he added.

The firm’s head of investment consulting for Europe Paul Trickett said funds should bear in mind that the best buying opportunities typically arise before economic stabilisation and recovery are clear.

He said pension funds should not react to short-term poor relative performance from high-quality managers.

“Historically, it’s often after such performances that these managers produce stronger returns,” Trickett said.

“We would also caution against reactionary like-for-like manager changes, because of recent significant increases in transition costs,” he said.

According to Trickett, it would be prudent to wait for some of the present uncertainty around shorting rules and costs to be resolved before investing new capital in funds with long lockups. – Bernama