Page 61 - KWAP_AR2022

FoR betteR PeRFoRmAnce Annual Report 2022 59

Performance of International External Mandates as at Despite a volatile year for fixed income markets, KWAP’s
31 December 2022 (in MYR Terms) domestic sovereign bonds portfolio registered a gross
investment income of RM1.44 billion, with an improved
Excess TWRR recorded from an underperformance of 28 bps to
Allocation TWRR Benchmark
Mandate Returns
(%) (%) (%) 11 bps in 2022. The underperformance is attributed to our
(%)
underweighting of longer duration bonds to protect our
Conventional 1 41.9 -22.30 -11.90 -10.40 portfolio against large marked-to-market losses amidst the
market volatility.
ESG 46.6 -14.13 -16.61 2.47
Multi-Factor 11.4 -11.21 -15.04 3.83 KWAP’s total investment in government bonds (Malaysia
Total 100.0 -14.66 -15.04 0.38 Government Securities [MGS], Government Investment
Issuance [GII] and Government Guaranteed [GG] bonds)
B) FIXED INCOME continued to grow for the year, as its market value grew
by 5.6% compared with the previous year. Approximately
FIXED INCOME PERFORMANCE 83% of the holdings are in MGS and GII while the remaining
17% is in GG bonds. KWAP’s total investment in sovereign
Amidst the uncertain global macro backdrop in 2022, bonds as at 31 December 2022 increased to 23.9% of the
KWAP’s fixed income portfolio generated a TWRR of 2.71%, total investment assets compared to 22.8% in the previous
with an outperformance of 18 bps to its benchmark. year.

Moving forward, with the approval of over RM11 billion KWAP remained an active participant in the primary
in new investments for Malaysia sovereign bonds and and secondary market for domestic government
33 domestic corporate bonds, KWAP expects further bonds and government guaranteed bonds issuances.
improvement in its return profile. This given to the fact that The annual cumulative trading volume in 2022 was
our investment in higher yielding bonds across period of RM12.39 billion, with purchase volume of RM8.64 billion
weaknesses seen in 2022 will continue to provide us with and sales volume of RM3.75 billion.
sustainable income.
In line with KWAP’s view that interest rates would trend
DOMESTIC SOVEREIGN BONDS higher, KWAP hedged a portion of its fixed income
Portfolio Segregation by Instrument Type as at 31 portfolio via interest rate swap (IRS) throughout the year
December 2022 to protect the value of its sovereign bonds. Some of the
positions have since been unwound towards the end of the
17% year as global central banks are reaching the end of their
56% tightening cycle.

For 2023, KWAP expect the volatility seen across 2022
to continue as major central banks such as the Fed and
ECB continue to battle the persistently high inflation levels.
27%
Lag effect of aggressive rate hikes by these major central
banks is expected to impact economic data in a significant
• MGS • GII • GG manner with expectations of slower global growth towards
end of 2023.

1 Note: Global Equity - Conventional mandate was converted from Asia Pacific Ex-Japan mandate, effective in February 2022.