MARC has affirmed the investment manager rating of IMR-2 on Kenanga Investors Berhad (KIB). The rating is premised on KIB’s well-established investment management processes, strong risk management practices and operating track record. These factors are moderated by its relatively small asset size and moderate financial profile.

KIB is a wholly owned fund management subsidiary of Kenanga Investment Bank Berhad (Kenanga), managing unit trust funds and investment funds through both conventional and Shariah-compliant investment schemes. KIB’s assets under management (AUM) expanded to RM12.6 billion as at end-2019 from RM7.2 billion in 2018 following the acquisition of Libra Invest Berhad (Libra Invest) in July 2019. Despite the increased AUM size, KIB’s overall market share remain modest at about 1.5% of total AUM in Malaysia. 

KIB offers investment products to meet its clients’ investment appetite, focusing mainly on domestic investments: equity funds made up 56.9% of total AUM, fixed income 29.6% and money market funds 9.6% (2018: 58.4%; 31.1%; 6.2%). In terms of KIB’s capability to execute fund strategies, MARC views the fund manager to have relevant expertise and adequate resources as part of the Kenanga group. To date, KIB has 25 experienced investment personnel with several senior members having more than 10 years of significant experience in domestic and regional markets. KIB will continue its initiatives towards expanding its retail base through new products including financial planning business as well as developing new digital platform to strengthen its current distribution channels. 

The investment manager continues to benefit from operational and financial support extended by its parent, with which it shares a common brand name and resources. Certain support functions, including information technology, human resources and internal audit, are managed at the group level. MARC views the operation interlinkage between KIB and its parent allows for cost savings and thus improve efficiencies. 

KIB’s investment management process is underpinned by a comprehensive investment analysis and portfolio construction process, which are supported by appropriate information systems. Investment portfolios are subjected to periodic reviews to access their performance, which are measured against established benchmarks. The investment team is supported by reputable investment analytics systems comprising Bloomberg Port and a risk analytics system. Its trading and backroom activities are highly automated using Bloomberg AIMS and PORTIA systems. 

KIB’s governance and risk management framework remained sound, supported by active oversight by the board of directors and its parent’s risk management committee. Comprehensive policies and infrastructure are put in place to manage risks, which are well supported by information systems for risk analysis and compliance-checking functions. Operational risk is managed through forward- and backward-looking assessments, including regular self-assessments aimed at identifying risk areas and establishing key risk indicators to provide early warnings.

Against the backdrop of a challenging economic environment, the market performed poorly during the year. For 2019, we note that KIB’s average one-year, three-year and five-year annualised returns for its top 20 largest unit trust funds outperformed its benchmarks. 

In terms of financial performance, KIB recorded profit before tax of RM5.6 million in 2019 on the back of a 8.0% y-o-y increase in revenue to RM104.9 million. As at end-2019, KIB’s shareholders’ funds stood at RM34.9 million, above the Securities Commission’s minimum requirement of RM20 million.