Rating action           

MARC Ratings has affirmed its investment manager rating of IMR-2 on Kenanga Investors Berhad (KIB).      

Rationale     

The rating primarily reflects KIB’s well-established investment management process, sound risk management practices and strong operating track record. These attributes are tempered by its relatively modest size and moderate financial profile. 

KIB is wholly owned by Kenanga Investment Bank Berhad (KIBB). It manages unit trust funds and investment funds through both conventional and Shariah-compliant investment schemes. With assets under management (AUM) of RM19.0 billion and about 2.0% market share by AUM as at end-June 2023, KIB is relatively modest in size compared to other fund management companies in Malaysia. 

KIB offers various investment products catering to different investment appetites, focusing mainly on domestic investments. Equity funds remain KIB’s largest fund type, representing 44.8% of the asset manager’s AUM as of end-June 2023. About 30.6% of KIB’s AUM was invested in fixed income as at end-June 2023, with another 16.7% in money market funds, and 6.2% in balanced funds. MARC Ratings notes that most of KIB’s funds have performed better than its benchmark and are comparable to its peers.

KIB’s rating reflects its well-formalised and defined investment process and the experience of its key staff. The company boasts 32 experienced investment personnel, with several senior members with over 10 years of proficiency in both domestic and regional markets. The rating also considers the benefits derived from being part of the Kenanga group. These benefits include a common brand name and operational savings from centralised group functions such as risk management and compliance, internal audit, human capital, and technology support. 

  

KIB’s investment process is well structured. Decisions are based on in-depth fundamental research and analysis, guided by detailed strategies and backed by robust automated and integrated office systems. MARC Ratings views the technology platform supporting investment decision-making, trading activities and backroom operations as sufficiently robust and befitting the nature and complexity of the company’s activities. The asset manager also has a well-documented process for reviewing portfolio performance. Investment portfolios are subjected to periodic reviews to monitor their performance against established benchmarks. Also in place is a strong governance and risk management framework, with active oversight by its board of directors, as well as KIBB’s risk management committee. 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.

In terms of financial performance, KIB’s revenue for 1H2023 grew 8.1% y-o-y to RM142.9 million on the back of higher management fees and service charges, while its pre-tax profit declined to RM25.4 million (1H2022: RM32.4 million) due to higher expenses during the period.