Krungsri Asset Management held a webinar launching KFDIVERSE

15 May 2020

Krungsri Asset Management Company Limited recently held a webinar on “Cashing in on Fixed Income Opportunities amidst Virus Worries” to revive confidence in quality fixed income investment across the globe. The company has also set to launch Krungsri Diversified Income Fund (KFDIVERSE), a new lower-risk, high-return open-ended fund which has the chance to generate high profits once the economies recover after the COVID-19 crisis. The fund’s initial public offering (IPO) is scheduled during 19 - 26 May 2020. 


At the seminar, Mr. Mathew Livas, Senior Vice President and Credit Product Strategist at PIMCO, one of the world’s leading fixed-income fund management companies and Mr. Kiattisak Preecha-anusorn, Vice President of Alternative Investment Fund from Krungsri Asset Management, were invited to share their views on global fixed income investment outlook and directions including opportunities and risks, and details on portfolio of the master fund, PIMCO GIS Diversified Income Fund portfolio that is able to yield better return when markets are on the uptrend and hedge better against risks amidst market downturns. 
 
Mr. Kiattisak said that during the COVID-19 pandemic in March, markets of all risky assets and fixed-income hit their lows in 11 years. In particular, high-yield fixed income has been hit hard since investors had concerned over high risks to defaults. However, a fact that governments and central banks have launched relief measures through a purchase of debt instruments in some kinds has lessened fluctuations with better trend. Thus, the timing is more appropriate for reinvestment. 
 
Citing PIMCO GIS Diversified Income Fund’s strengths - the master fund for KFDIVERSE, Mr. Kiattisak explained that the fund gives higher yield with lower risks, compared to other fixed income funds. Its distinguished strategy evolves in diversification of investment in a variety of fixed income with proactive investment style, flexibility for portfolio adjustments and quality portfolio management. Given long experiences and high expertise of the fund managers’ team, this master fund records favorable returns for over 10 years. Particularly, during the  ongoing COVID-19 economic crisis, the fund could adjust the portfolio in time keeping the loss lower than its peers and the industry average.  
 

Source: PIMCO as of 31 March 2020. This shows the performance of the master fund, so it is not complied to AIMC’s standard.

Mr. Livas said that PIMCO GIS Diversified Income Fund has diversified its investment in fixed income instruments, pouring capital in assets, and investment grade of about 25%. The fund focuses on investing in companies with sound fundamentals and strong financial status in industries resilient to economic changes. The fund also weighs 23% of its portfolio into high-yield fixed income of small firms. Each is carefully selected in industries which are capable of having high cash flow and being resilient to economic fluctuations. Another group the fund investing in is emerging-market fixed income. About 22% of its portfolio is placed in sovereign emerging-market fixed income and another 8% in non-sovereign ones. The remainder of its portfolio is diversified into others like government bonds and cash. The fund has also made market diversification in developed markets like the United States and emerging markets. 
 
Source: PIMCO as of 31 March 2020. All allocations are quoted in percentage market value. Other Regions includes Non EMU European countries as well as Developed Asia.

The fund’s risk management strategy combines Top-down through the macroeconomic analysis and asset search to fit economic situations with Bottom-up by asset selection and liquidity analysis before investment. Most of high-yield fixed-income is of high quality with BB credit rating. The fund avoids sensitive and cyclical sectors like energy and oil, while picking industries with strong fundamentals and growth potential. Its investment is weighted on banking and financial groups with strong balance sheet as well as telecom group with recurring income. This way helps the fund to manage risks and yield better returns. 
 
Source: PIMCO as of 31 December 2019. Sample for illustrative purposes only . *Fallen angels: Bonds that were once investment grade but have since been reduced to junk bonds.

PIMCO’s overall default rate is only 0.3 percent. Normally, high-yield fixed income’s default rate is about 4-5%, compared to PIMCO’s at 0.6% only. Recovery rate is as high as 60% and there’s a chance to enjoy return rather than suffer losses. 
 
Mr. Livas said that in the latter half of this year, investment could improve and the fund is always keeping a close watch on economic trends including declines in virus pandemic, eases of lockdowns in the Europe and the US and monetary measures of central banks in the Europe and the US. These factors will affect the overall economy and targeted assets. 
 
Mr. Kiattisak said that investing during the economic recession provides a good opportunity to reap very high returns in the next years. In the 2008 economic crisis, markets tumbled sharply but provided a 25% return in the following year. And state measures could assist the economy to improve in the next one to two years. Mr. Livas added that, presently, carry yieldof the fund is about 6.3%. It is thus believed that this yield rate can be a good proxy implying the potential attractive return for investors.
 
Now, investors can consider Krungsri Asset Management’s KFDIVERSE as their potential alternative for foreign fixed income fund. Previously, the Company had launched three foreign fixed income funds, namely KF-CSINCOM and KF-SINCOME investing in securitized debt instruments, and KFPREFER investing in preferred securities which is exposed to higher risk but give higher potential returns. Mr. Kiattisak said that investors should diversify their investment with good proportion. He recommends to have KF-CSINCOM and KF-SINCOME as a core portfolio, while allocate some tactical allocation in KFDIVERSE and KFPREFER in order to gain more return potential. 
 
KFDIVERSE hedges against foreign exchange risks in full amount and offers two investment policies for investors to choose:
  • KFDIVERS-A:     No auto-switching policy
  • KFDIVERS-R:  4 times a year by automatically switching to units of KFCASH-A (Automatic switching transaction will cause the decrease in outstanding units.)
 
The fund will make IPO of its units during 19 - 26 May 2020. During the IPO period, investors investing 30 million Baht or more will pay front end fee or switching-in fee at only 0.75% (from normal rate that is 1%). 

For more details of the fund,   click here


Disclaimer
  • Krungsri Asset Management Co., Ltd. (“The Management Company”) believes the information contained in this document is accurate at the time of publication, but does not provide any warranty of its accuracy. Similarly, any opinions or estimates included herein constitute a judgment as of the time of publication. All information, opinions and estimates are subject to change without notice.
  • Please study fund features, performance, and risk before investing. Past performance is not an indicative of future performance.
  • KFDIVERSE invests in the master Fund named PIMCO GIS Diversified Income Fund (Institutional – Income (USD)) (The master fund), on average in an accounting year, of not less than 80% of fund’s NAV. The master fund has investment policy to invest at least two-thirds of its assets in a diversified portfolio of Fixed Income Instruments of varying maturities | Risk level 5: moderate to high risk
  • KFDIVERSE may invest in non-investment grade or unrated debt securities, so investors may be exposed to risk which result in loss of investment return and principal.
  • KFDIVERSE, KF-CSINCOM, KF-SINCOME, and KFPREFER will enter into a forward contract to fully hedge against the exchange rate risk, in which case, it may incur costs for risk hedging transaction and the increased costs may reduce overall return.

For more details or to request for the Fund Prospectus, please contact:
Krungsri Asset Management Co., Ltd.
Tel. 0 2657 5757  or Bank of Ayudhya PCL. / Selling agents
 
 
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