Page 59 - KWAP_AR2022

FoR betteR PeRFoRmAnce Annual Report 2022 57

INVESTMENT REVIEW

ASSET CLASS REVIEw

A) EqUITY KWAP’s internal domestic equity portfolio recorded
Time-Weighted Rate of Return (TWRR) of 1.62% against
EqUITY PERFORMANCE the benchmark return of –5.40%, which resulted in an
outperformance of 702 bps.
As at 31 December 2022, KWAP’s equity exposure
accounted for 46.1% of KWAP’s total investment assets. Internally-Managed International Equity Portfolio
Domestic equity represents 76.6% of our total equity KWAP’s International Equity Portfolio faced numerous
exposure, while the balance was in the international equity challenges throughout the course of 2022. The aftermath
markets. Out of the total equity exposure, 85.6% was of COVID-19 pandemic, coupled with rising geopolitical
managed internally while the rest was outsourced to the tensions have contributed to a very challenging equity
external fund managers (EFMs) appointed by KWAP. market environment. The hawkish stance adopted by
global central banks contributed to global stocks dipping
In 2022, equity portfolio recorded a total return into bear market territory.
of -2.47% versus the blended benchmark of
-7.46,translated into an outperformance of 500 bps. In view of the concerns surrounding high inflation and
It had also outperformed the blended benchmark recessionary risks in developed markets, the Global Equity
over a longer period as shown in the table below:- Portfolio (GEP) adjusted its cash allocation upwards and
shifted its position from growth to value. This decision
helped to minimise the negative impact on the portfolio and
Item 2022 2021 3 years 10 years secured capital gains within the first half of 2022.
Portfolio (%) -2.47 7.69 4.18 4.36
The MSCI World Index (MxWD Index) saw a total return
Benchmark -7.46 1.27 -0.41 0.88 of -15.04% within the year, with the S&P 500 and MSCI
(%) Asia Pacific posting returns of -19.44% and -14.57%,
respectively. On the other hand, the United Kingdom’s
Excess 5.00 6.42 4.60 3.48 FTSE 100 index outperformed the global benchmark and
Returns (%) displayed a positive total return of 2.9%.

In terms of sector performance, healthcare and energy
INTERNALLY-MANAGED continued to perform well in 2022 as the beneficiaries
of high gas prices, with materials trailing closely behind.
Internally-Managed Domestic Equity Portfolio Internally, the GEP was able to outperform the benchmark
by 34 bps, recording a total return of -14.70% against the
Our defensive strategy with primary focus on actively
managing the overall portfolio’s long-term sustainable MxWD Index’s return in Malaysian Ringgit (MYR) terms.
growth and enhancing the portfolio’s income generating EXTERNALLY-MANAGED
capability had worked well in 2022, while we cautiously
navigated through the lackluster domestic equity market. Externally-Managed Domestic Equity Portfolio
The overall strategy was to stay focused on growing
the portfolio’s Net Asset Value (NAV), with increased As at 31 December 2022, the total domestic equity
investments in high quality companies that generated portfolios managed externally by our asset managers
sustainable and robust free cash flow. This translated to accounted for 4.4% of KWAP’s total investment assets,
an increase in the overall portfolio’s dividend yield which a decrease from 4.7% from the previous year exposure.
contributed immensely to the overall income in 2022. Overall, there are four domestic mandates comprising
This strategy provided us with ample cushion to ride eight EFMs managing Conventional mandates, three
through streams of volatility in the domestic equity market EFMs managing Shariah mandates, one EFM managing
throughout the year. On the other hand, capital gains were Environmental, Social and Governance (ESG) and three
derived from active tactical position taken in the non-core EFMs managing Absolute Return mandates.
portfolios on liquid stocks.