The rating primarily reflects KIB’s well-established investment processes, sound risk management practices and strong 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 is a relatively modest fund management company, with assets under management (AUM) of RM18.2 billion accounting for about 2.0% of total AUM in Malaysia as at end-June 2022 (1H2021: 1.4%). 

KIB offers various investment products catering to different investment appetites, focusing mainly on domestic investments. As at end-June 2022, equity funds formed the bulk of AUM at 43.5%, followed by fixed income funds at 31.1%, balanced funds at 10.6% and money market funds at 14.8%. Being a part of the Kenanga Group of companies, MARC Ratings views KIB has the relevant expertise and adequate resources to execute its fund strategies and meet their obligations. To date, KIB has 29 experienced investment personnel with several senior members having more than 10 years of significant experience in both domestic and regional markets. KIB will continue expanding its portfolio to cater to different risk appetites.

KIB benefits from the operational and financial support extended by its parent through shared resources and a common brand name. Certain support functions are managed at the group level, such as information technology, human resources, internal audit and risk management. MARC Ratings views that the shared network among the group has yielded KIB with some savings.

KIB’s investment management is underpinned by a comprehensive investment analysis and portfolio construction process which are supported by appropriate systems. KIB’s technology platform which supports investment decision-making, trading activities and backroom operations is found to be sufficiently robust and befitting the nature and complexity of its activities. KIB’s continued adherence to reporting commitments of the investment portfolios is viewed positively. Investment portfolios are subjected to periodic reviews to assess their performance by which they are measured against established benchmarks.

KIB’s governance and risk management framework remains 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 risk, 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. 

As at end-June 2022, most of KIB’s top 20 largest funds registered negative one-year returns in line with the decline in market performance. This was due to negative market sentiment arising from inflationary pressures as well as monetary policy tightening. In addition, most of the funds’ one-year returns underperformed against their respective benchmarks. KIB’s funds’ 3-year and 5-year returns outperformed its benchmarks. 

KIB’s AUM grew 32.0% y-o-y to RM16.4 billion in 2021, following its aggressive marketing strategy. Subsequently, the larger AUM supported an increase in revenue of 67.6% y-o-y to RM243.7 million, driven by higher sales fees and management fees. KIB’s pre-tax profit stood at RM36.3 million in 2021, double of that registered in 2020. MARC Ratings observes that total expenses increased 40.0% y-o-y to RM84.1 million due to higher marketing costs, in line with its aggressive AUM expansion as well as the increase in staff costs.

In June 2022, KIB maintained the increasing AUM trend with a growth of 38.4% y-o-y to RM18.2 billion. Its revenue grew 18.2% y-o-y to RM132.2 million on the back of higher management and performance fees, while its pre-tax profit rose to RM32.4 million (1H2021: RM15.2 million).