View Credit Analysis Report (605374)

Date Article2021-01-04 00:00:00
MARC has affirmed its 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 is relatively a modest fund management company, with assets under management (AUM) of RM12.6 billion accounting for about 1.5% of total AUM in Malaysia as at end-September 2020. 

KIB offers various investment products catering to different investment appetites, focusing mainly on domestic investments; fixed income constitutes 47.5% of its AUM. The remaining AUM comprise equity funds (40.2%), money market funds (4.5%), balanced funds (4.7%), feeder funds (2.7%) and structured funds (0.4%). In terms of KIB’s capability to execute fund strategies, MARC views KIB to have the relevant expertise and adequate resources as part of the Kenanga group. To date, KIB has 20 experienced investment personnel with several senior members having more than 10 years of significant experience in the domestic and regional markets. KIB will continue its initiatives towards expanding its retail base through strategic planning, new products as well as developing a new digital platform to strengthen its current distribution channels.

KIB continues to benefit from operational and financial support extended by its parent by sharing 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. We view 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 was found to be sufficiently robust and fitting the nature and complexity of its activities. KIB’s continued adherence to reporting commitments is viewed positively. Investment portfolios are subject to periodic reviews to access their performance, by which they are measured against established benchmarks.

KIB’s governance and risk management framework remain 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.

As at end-September 2020, KIB recorded a 35.7% y-o-y higher revenue to RM100.3 million, while pre-tax profit increased to RM7.6 million (9M2019: RM2.5 million). MARC understands that KIB rebalanced its portfolio to shelter its funds from short-term volatilities during the recent uncertain market conditions. It will remain a challenge for KIB to maintain its profit momentum in the near term. However, against the challenging environment, MARC draws some comfort in KIB’s available resources. The rating agency views the fund manager to have the relevant expertise and adequate resources to execute fund strategies and meet its objectives.

Major Rating Factors

Established investment process; and
Strong governance and risk management framework.

Modest-sized asset management company; and
Moderate financial profile.

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