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MAMG Global Sukuk Income-I Fund: Stable returns from a portfolio of Global Islamic securities By Maybank Asset Management 01 Nov 2020 
Maybank Asset Management, has been actively growing our Islamic capabilities for clients in the region in addition to helping our group facilitate the growth of Islamic finance in Singapore. Against Maybank’s drive to provide more holistic Islamic solutions in Singapore, our team has worked closely with Maybank Islamic Banking Singapore to collectively engage the community to better understand and serve their needs.
This has allowed us to formulate our flagship Islamic solution, the MAMG Global Sukuk Income-I Fund. In a nutshell, the fund serves to provide both a constant income and low volatility solution in global Islamic bonds (Sukuk). Maybank Asset Management’s fixed income team collaboratively manages the fund with Azimut Portfolio Management, one of Italy’s leading independent fund manager, and it is the largest fund of its kind with an AUM of USD 453 million (as of 30th September 2020).
Why invest in the MAMG Global Sukuk Income-I Fund?
The MAMG Global Sukuk Income-I Fund is suitable for both the Muslim community as well as conventional investors as the fund offers protection from higher interest rates and stable yield.
The fund’s investment objective is to enhance the value of its assets in the medium or long term through investing all or substantially all its assets into the Master (USD Dist) class of MAMG Global Sukuk Fund (the “Underlying Fund”), a UCITS Complaint sub-fund of the Luxembourg-domiciled AZ Multi Asset. The Underlying Fund shall normally invest in "Sukuk" Islamic securities instruments compliant with Sharia principles.
Total Return Focus · The fund targets a return of 4-5% per annum in USD and 4% per annum in SGD.
Stable Income Yield · The fund aims to pay out potential quarterly distributions. Since inception in October 2013, MAMG Global Sukuk Fund (the “Underlying Fund”), has delivered consistent income payouts. Historical payouts were kept stable at 4.0-5.0% per annum in USD terms and 4% in SGD.
The demand for Sukuk has been surpassing Sukuk issuances worldwide · Sukuk’s supply is limited and some of the Sukuks have higher yield compared to the conventional bonds of similar rating. Sukuks are less affected by rise in US Treasury (UST) · Sukuks are less affected by rise in UST yield than conventional corporate bonds as it is negatively correlated to US Treasuries due to its short duration nature.
Lower Risk Exposure · Sukuks may have lower risk exposure as its predominant exposure is to Sovereigns and Financials, which constitutes over 80% of Sukuk Index weights. Sukuks also have a lower risk of default as its average credit rating is investment grade.
How has the MAMG Global Sukuk Income-I Fund performed this year with the COVID-19 situation?
The MAMG Global Sukuk Income-I Fund, like all other bond funds, was negatively impacted by the March sell-off due to global lockdown. The fund has recovered since then and has started to outperform as Sukuk investors are back in action. YTD return is positive at 0.9% as of 30th September 2020.
We favour Investment Grade (IG) over High Yield (HY) rated Sukuks. We like Financials among IG Sukuks given pick up over sovereign and strong government support. Despite oil prices at low USD 40/bbl, Gulf Cooperation Council (GCC) governments funding position remains comfortable and 81.4% of Global Sukuk remain IG rated. Sukuks still trade wider compared to conventional bonds for the same credit rating despite recovery post March’s sell off.
Source: Moody’s, Maybank Asset Management Singapore, August 2020
MAMG Global Sukuk Income-I Fund: Portfolio Positioning
September proved to be a volatile month for asset markets which ended the month lower after rallying strongly during the first half of the month. Mixed economic data, rise in COVID-19 cases globally and the uncertainty surrounding upcoming US elections were some of the factors that dampened investor sentiment. While market outlook remains uncertain in the near term as global COVID cases remain at elevated levels, emergence of a COVID vaccine and market friendly outcome of US elections can reduce market volatility.
As of 30th September 2020, the fund had a positive performance of 0.16% (0.90% YTD). The fund’s portfolio duration remains low and stable with an average maturity of 3.5 years. Cash and cash equivalents and International Islamic Liquidity Management (IILM) issues accounted for 11.2% of the NAV.
The average credit rating of the portfolio is at BBB- and the yield to maturity (YTM) is at 4.0%. The portfolio diversification remains high with 95 issues and the top 10 positions accounting for 25.8% of the total NAV. The Fund’s currency diversification (MYR, IDR, SGD, and GBP) is stable at 3.9% of NAV.
Global Sukuk Outlook 
Find out more about the Maybank Asset Management Global Sukuk Income-I Fund
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This document has been prepared solely for informational purposes with no consideration given to the specific investment objective, financial situation and particular needs of any specific person and should not be used as a basis for making any specific investment, business or commercial decisions. This document does not constitute (1) an offer to buy or sell or a solicitation of an offer to buy or sell any security or financial instrument mentioned in this document and (2) any investment advice or recommendation. Investors should seek financial or any relevant professional advice regarding the suitability of investing in any securities or investments based on their own particular circumstances before making any investments and not on the basis of any recommendation in this document.
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Information is correct as of 07/11/2020. |
