Recently, one of the widely discussed topics among friends and colleagues would definitely regarding the FIFA World Cup 2018 that has kick-started last Thursday in Russia. While enjoying football matches and cheering for the goals over the next couple of weeks, in this article, we would like to share with investors how the
FSM managed portfolio is constructed with the strategy that is synonymous with the “Football Team” analogy – having players with different strengths to cover the entire field.
Portfolio’s Defensive Players (Fixed Income Funds)
Generally, goalkeepers and defenders are the positions that people have always neglected. To prove that, one can try to type “world greatest footballer” in Google, and you will get the results like Lionel Messi (Forward), Cristiano Ronaldo (Forward), Ronaldinho (Midfielder), Pelé (Forward) or Diego Maradona (Midfielder), while none of them are defensive players. On top of that, in history, there were only four defensive players have won the Ballon d'Or, one most the most prestigious annual football awards since 1956, namely, Franz Beckenbauer, Matthias Sammer, Lev Yashin (the only goalkeeper) and Fabio Cannavaro.
Although, naturally, human brain would prefer the immediate pleasure of a goal which makes the name of the striker or midfielder to be so memorable, we should not completely ignore the importance of the defensive players who have usually prevented the opposition from scoring.
Similarly, fixed income fund, which have a role akin to the defenders in the soccer team, play a very important role as the portfolio stabilizer to balance the risk and return of the portfolio and to reduce any potential market volatility.
Currently, in our bond portfolio, we have the Malaysia bond funds (short duration vs all duration) in the portfolio as the key defensive players (goalkeeper and center back). Meanwhile, we also have Emerging market bond fund, Asian bond fund and the Global High Yield bond fund which are the wing-backs whose primary role is to defend the opposing players while supporting the midfielder and striker with the attack.
Portfolio’s Midfielder (Core Equity Fund)
Midfielder, which is also known as the engine room that runs a match or the backbone of a soccer team as we always heard the saying of “if you control the midfield, you stand a fine chance of winning the game”. It is also why Manchester Untied was willing to pay the world highest transfer fees for Paul Pogba back then in 2016, as he is expected to do “everything”, including but not limited to defend, tackle, attack, assists and score.
In our FSM Managed Portfolio, the core equity funds, like
United Global Quality Equity Fund (Developed Market),
CIMB-Principal Asia Pacific Dynamic Income Fund (Asia ex Japan),
Eastspring Investment Global Emerging Market Fund (Emerging Market) and
Kenanga Growth Funds (Malaysia) were meant to be the midfielders, providing the right balance for the portfolio.
Portfolio’s Striker (Supplementary)
Last but certainly not least, the most highly valued position in a soccer team – Striker. Currently, the top 3 highest-paid soccer players in the world, Lionel Messi (although he is the first player to miss penalty in FIFA World Cup 2018), Cristiano Ronaldo and Neymar are all in the striker position, who are likely to convert a high percentage of their chances into goals that could help the team to secure the victory.
In FSM Managed Portfolio, funds that have currently been positioned as the strikers are the high-risk single country funds such as
CIMB-Principal Greater China Equity Fund (Greater China Equity),
United Japan Discovery Fund (Japan Small Cap) and also
KAF Tactical Fund (Malaysia Small Cap). In order to ensure that the portfolio is not overwhelming with plenty of strikers and to strike for a balance between risk and return, we can only invest up to 20% of the equity allocation into the supplementary portion of the portfolio.
All in all, investors should bear in mind that, “a good player might help in scoring a goal, but a team with good strategy and formation could help in securing a victory”. This is also the reason why we always emphasize investors to adopt the portfolio approach for their investment, to ride through the market volatility along their investment journey.
For investors who wish to leverage on our expertise as they have little or no time to carry out their own analysis on the available mutual funds or to construct and manage their own portfolio, they can consider the one-stop portfolio solution which help investors to navigate the portfolio through the financial landscape in hope to achieve optimization in terms of risk-adjusted returns – FSM Managed Portfolio.