Fixed Income

• The MGS portfolios are constructed to maximize yield while allowing the opportunity for capital appreciation via appropriate duration, issue, and yield curve deployment. We are very active in the primary and secondary market, managing portfolio positions via duration management and the coupon return via the maximization of portfolio yield.

• Investment of KWAP funds in fixed income securities for purpose of investment and trade strategy.
• Generating both short and long term competitive returns from fixed income securities in accordance to the KWAP Investment Policy and Guidelines.

• Malaysian Government Securities (MGS) - interest bearing long-term bonds issued by the Government of Malaysia (GOM) with an original maturity of more than one year. Funds raised are used to finance development expenditure.
• Malaysian Treasury Bills (MTB) - short-term securities issued by the Government of Malaysia with the original maturity of less then one year.
• Government Investment Issues (GII) and Malaysian Islamic Treasury Bills (MITB) - long-term and short-term non-interest bearing securities issued by the Government of Malaysia based on Islamic principles.

• Investment of KWAP Funds is deposited in a wide range of money market products at attractive yields to insure best return value on our investments.
• Funds are deposited in the Central Bank of Malaysia (Bank Negara Malaysia), licensed bank or financial institution as defined under the Banking and Financial Institutions Act 1989 (Act 372), development financial institutions as defined under the Development Financial Institutions Act 2002 (Act 618), Islamic bank under the Islamic Banking Act 1983 (Act 276) and duly licensed bank or financial institution outside Malaysia.

• Maximizing the returns of interests and dividends for bank deposits and money market instruments.
• Maximizing of investment returns founded on a reasonable level of risks via money market instruments.

• Investment of KWAP Funds in money market instruments in conventional & Islamic Market.
• Money market instruments include:
  • Treasury Bills
  • Bank Negara Monetary Notes
  • Banker’s Acceptance
  • Deposit Certificates

• As at 31 December 2008, KWAP’s investment in money market deposit comprised Fixed Deposits, Short Term Placements, Bankers Acceptances and Negotiable Instruments of Deposit in both Islamic and Conventional instruments.
• Total holdings in money market deposit grew by 13.32%to RM14.14billion in 2008 from RM12.48 billion in 2007.
• In 2008, money market contributed gross income of RM556.05 million, an increase of 104.81% from RM271.49 billion achieved in 2007.

• Investment of KWAP funds by way of giving out loans to the Federal Government, Malaysian State Governments and public authority bodies, corporate bodies in which the Federal Government has an interest and in any company.

• Loans are channeled to development projects with commercial value
• Organizations with high capability of servicing the loan and fulfill their responsibility as a borrower.

• Investment of KWAP funds in fixed or floating rate loans based on the KWAP Investment Policy and Guidelines.

• Corporations have turned their attention towards the bond market as a viable alternative to bank borrowings and the equity market. As such, institutional investors as such KWAP are able to adjust our risk-return profile through the trading of various securities available in the market.
• KWAP invests in both conventional and Islamic papers comprising Fixed Rate Serial Bonds, Medium Term Notes as well as Commercial Papers.

A dedicated team to oversee credit portfolio and enhance investment process. We seek to add value in the fixed income market by utilizing four primary approaches:

• Analytical credit assessment of securities with the implementation of in-house credit scoring system
• Stringent security selection – minimum rating requirement for bond investment is A3 (RAM) or A-(MARC)
• Ongoing surveillance on current securities in our holding to contain credit risk and take precautionary measures should adverse credit events are developing
• Taking advantage of yield curve structure and position our portfolio accordingly

• In 2008, KWAP’s overall holdings of corporate bonds, inclusive of funds managed by external fixed income fund managers grew to RM8.34 billion from RM6.21 billion at the end of 2007.
• Gross income was up by 109.54% to RM363.36 million in 2008 from RM173.41 million in 2007.
• KWAP’s investment in corporate bonds comprised RM4.69 billion in conventional corporate bonds, RM3.15 billion in Islamic corporate bonds and RM500 million managed by external fixed income fund managers.