KWAP: RM700m al­lo­cated for in­vest­ing in small-cap com­pa­nies

The Sun (Malaysia) - - SUNBIZ -

PETAL­ING JAYA: The Re­tire­ment Fund (In­cor­po­rated) (KWAP) has to date al­lo­cated RM700 mil­lion for in­vest­ments in small cap­i­tal­i­sa­tion com­pa­nies in the coun­try.

KWAP said it is look­ing at in­creas­ing the size of its small-cap eq­uity man­date for fur­ther growth and earn­ings po­ten­tial.

Set up in April 2014 with a cap­i­tal of RM200 mil­lion, the small-cap eq­uity man­date rep­re­sents KWAP’s ini­tia­tive to di­ver­sify its eq­uity in­vest­ments, which are con­cen­trated on large cap­i­tal­i­sa­tion stocks.

In a state­ment yes­ter­day, KWAP said of the to­tal al­lo­ca­tion, RM380 mil­lion is in­ter­nally man­aged by the pen­sion fund, while the re­main­ing is man­aged by ex­ter­nal fund man­agers (EFMs), spread over four fund man­agers li­censed un­der the Se­cu­ri­ties Com­mis­sion (SC).

KWAP said this is in line with the gov­ern­ment’s call to al­lo­cate a RM3 bil­lion fund to li­censed fund man­agers un­der the SC to in­vest in po­ten­tial small and medium cap­i­tal­i­sa­tion com­pa­nies.

KWAP CEO Datuk Wan Ka­maruza­man Wan Ah­mad said, in gen­eral, small-cap stocks with the right niche of­fer rel­a­tively higher earn­ings growth po­ten­tials com­pared to the large-cap stocks un­der the cur­rent low growth en­vi­ron­ment, as large-cap stocks’ earn­ings growth typ­i­cally mir­rors the pace of the cur­rent eco­nomic cli­mate.

He said the wide val­u­a­tion dif­fer­ence be­tween large-cap and small­cap com­pa­nies pro­vides the fund with the op­por­tu­nity to in­vest in fun­da­men­tally strong com­pa­nies that of­fer a re­ward­ing propo­si­tion in the long run.

He added that the small-cap stocks are also po­ten­tial ac­qui­si­tion tar­gets, not­ing that ac­quir­ing smaller and grow­ing prof­itable com­pa­nies is one of the eas­i­est ways to grow earn­ings.

As at Sept 30, 2016, the EFMs recorded a re­turn of 8.23% over a pe­riod of one year, while the in­ter­nal fund man­agers pro­vided an 11.19% re­turn within the same pe­riod, and the to­tal re­turn over a three-year pe­riod for both stood at 18.41%.

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