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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High Net-Worth Individual

An individual whose total net personal assets, or total net joint assets with his or her spouse, exceeds RM3 million or its equivalent in foreign currencies, excluding the value of the individual’s primary residence.
An individual who has a gross annual income exceeding RM300,000 or its equivalent in foreign currencies per annum in the preceding 12 months.
An individual who, jointly with his or her spouse, has a gross annual income exceeding RM400,000 or its equivalent in foreign currencies per annum in the preceding 12 months.

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A company that is registered as a trust company under the Trust Companies Act 1949 which has assets under 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 SC to be a trustee under the CMSA and has assets under management exceeding RM10 million or its equivalent in foreign currencies.
A pension fund approved by the Director General of Inland Revenue under the Income Tax Act 1967.
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Central Bank of Malaysia established under the Central Bank of Malaysia Act 2009.
A holder of a Capital Markets Services Licence.
An executive director or chief executive officer of a holder of a Capital Markets Services Licence.
A unit trust scheme or a prescribed investment scheme.
A closed-end fund approved by the SC.
A licensed bank as defined in the Financial Services Act 2013 or a licensed Islamic bank as defined in the Islamic Financial Services Act 2013.
A Labuan bank as defined in the Labuan Financial Services and Securities Act 2010.
A licensed insurer as defined in the Financial Services Act 2013.
An insurance licensee as defined in the Labuan Financial Services and Securities Act 2010.
A takaful licensee as defined in the Labuan Islamic Financial Services and Securities Act 2010.
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