Why Bonds?

The role of fixed income as part of a diversified investment strategy

Income
Stream

Fixed income provides income from regular coupon payments, which occur on set dates throughout the year. This income is dependable; investors know when and how much income they will receive at each payment period, which may be monthly, quarterly, twice yearly or annually.

Diversification from Stock Market Risk

Most fixed income investments are classified as defensive assets, with a different risk and return profile to equities. As an asset class, fixed income help with diversification because of their low correlation to other asset classes. This is because fixed income assets are generally less volatile on average to stocks because more is known about their income flow (e.g. the certainty of coupon vs non-certainty of dividends) and tend to do better when stock markets slump.

Capital
Preservation

Bonds also provide capital stability. Principal is to be repaid to investors upon maturity of the bond. This makes many fixed income securities, especially government and government-guaranteed bonds, an effective capital preservation tool. This of course, assumes that the issuer doesn’t default, which is where the in-depth analysis undertaken by Opus’ team of experienced professionals come into play.

Bonds versus Deposits

While investors turn to property and shares for income, they often turn to cash (e.g. bank accounts or fixed deposits) to minimize their overall risk exposure. However as interest rates have fallen, such assets no longer provide the same level of income as they once did and may barely keep pace with inflation.

Similar to fixed deposits, fixed income investments may yield a stable interest income that is usually higher than the interest received from normal deposit rates for a comparable tenure, with an added chance of capital appreciation. Furthermore, unlike fixed deposits, there are no penalties should the investors wish to redeem their investments.

Bond Portfolio (%)
12-Months Fixed Deposit Rate (%)
Inflation Rate (%)

Despite this, many Malaysian investors continue to rely heavily on fixed deposits for their defensive exposure. As the Malaysian population is expected to become an ageing nation by 2030, there is a growing demand for income producing investments as retirees focus on meeting expenses and preserving capital.

A Portfolio Essential

The benefits of holding fixed income securities as part of a balanced portfolio are evergreen. Fixed income assets can complement a portfolio by providing a reliable income stream with generally low correlation to shares, property and cash. Add that to the return of capital at maturity, fixed income assets are generally a lower risk option than shares and property.

The key to a successful investment strategy is having the right mix of assets in a portfolio. A diversified portfolio, one which includes fixed income, is generally better positioned to balance risk and return and ultimately meet investors’ investment objectives.

Leverage on our expertise in fixed income for your safer tomorrow.

Fixed Income – Higher Risk-adjusted Returns

In a volatile environment, fixed income offers superior risk-adjusted returns.

Bond Portfolio (%)
KLCI (%)

Notes:

KLCI refers to FTSE Bursa Malaysia KLCI Index
Bond Portfolio refers to OpusAM Consolidated Unconstrained Fixed Income Portfolio (gross of fees)
Past performance is not indicative of future performance
Sources: OpusAM, Bloomberg

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Sophisticated Investors

High Net-Worth Individuals

An individual whose total net personal assets, or total net joint assets with his or her spouse, exceeding RM3 million or its equivalent in foreign currencies, excluding the value of the individual’s primary residence; or
An individual who has a gross annual income exceeding RM300k or its equivalent in foreign currencies in the preceding twelve months; or
An individual who jointly with his or her spouse, has a gross annual income exceeding RM400k or its equivalent in foreign currencies in the preceding twelve months; or
An individual whose total net personal investment portfolio or total net joint investment portfolio with his or her spouse, in any capital market products exceeding RM1 million or its equivalent in foreign currencies.

High Net-Worth Entities

A company that is registered as a trust company under the Trust Companies Act 1949 and has assets under its management exceeding RM10 million or its equivalent in foreign currencies.
A corporation that is a public company under the Companies Act 2016 which is approved by the Securities Commission to be a trustee under the CMSA 2007 and has assets under its management, exceeding RM10 million or its equivalent in foreign currencies; or
A corporation that is carrying on the regulated activity of fund management solely for the benefit of its related corporations and has assets under its management exceeding RM10 million or its equivalent in foreign currencies.
A corporation with total net assets exceeding RM10 million or its equivalent in foreign currencies based on the last audited accounts.
A partnership with total net assets exceeding RM10 million or its equivalent in foreign currencies.
A statutory body established under any laws unless otherwise determined by the Securities Commission Malaysia.
A pension fund approved by the Director General of Inland Revenue under the Income Tax Act 1967.

Accredited Investors

A unit trust scheme, private retirement scheme or prescribed investment scheme.
Bank Negara Malaysia.
A licensed person or a registered person.
An exchange holding company, a stock exchange, a derivatives exchange, an approved clearing house, a central depository or a recognised market operator.
A corporation that is licensed, registered or approved to carry on any regulated activity or capital market services by an authority in Labuan or outside Malaysia which exercises functions corresponding to the functions of the Securities Commission Malaysia.
A bank licensee or an insurance licensee as defined under the Labuan Financial Services and Securities Act 2010.
An Islamic bank licensee or a takaful licensee as defined under the Labuan Islamic Financial Services and Securities Act 2010.
A chief executive officer or a director of any person referred to in points III to VII under the Accredited Investors category.
A closed-end fund approved by the Securities Commission Malaysia.