Generally, there are two type of risks namely market risk and stock specific risk. The fund’s market risk is prudently managed through both strategic and tactical asset allocation approaches which in turn depend on fundamental and technical analyses. The asset allocation exposure may differ from time to time depending on capital market conditions. Asset and sector allocation are based on thorough macroeconomic analysis. The fund’s equity exposure may increase to a maximum of 70% on the expectation that the stock market has a potential to appreciate in the future. On a temporary defensive move, the fund’s equity exposure will reduce to below 50% if the market is expected to decline. To manage the fund’s stock specific risk, in depth company analyses are adopted. Stock selection is based on stringent investment criteria which include the company’s financial strength, business operations and management. Valuations of the companies are thoroughly analyzed to ensure the fund invests in companies that are viable and may produce reasonable returns in the long term. The fund also takes into account diversification and trading liquidity to manage the stock specific risk.

For fixed-income investment, credit valuation and interest rate direction are the most critical risk factors to be considered. As for credit valuation, the fund manager has set stringent investment criteria in assessing fixed-income investment, covering mainly the nature of business, cash flow, gearing level, management and collateralization. The fund only invests in investment grade bonds rated by either RAM or MARC. For interest rate risk management, the fund’s fixed-income exposure will be managed by adjusting the tenor of bond portfolio. If the interest rate is expected to go up in the future, the fund will invest in the shorter tenor bond to mitigate the impact of shortfall in the bond’s price.