Date: Week of March 1 - March 7, 2010

Avenue TacticalEXTRA, a fund that aims to deliver absolute returns regardless of market conditions, has grabbed the Mixed Asset MYR Flexible award for the three-year period for the second consecutive year. Avenue Invest Berhad, managing director Tan Jin Teik attributes the win to a disciplined and fundamental approach to investing over the years and conviction.

The investment house believes there are always temporary mismatches between what the market is willing to pay for a stock and its intrinsic value. “Once we have conviction in an idea, we look to exploit this opportunity in a disciplined manner. Discipline matters because in volatile markets, emotions often threaten to override logic,” explains Tan. However, there is no certainty fundamentals will remain the same.

“Occasionally, we do have ideas that do not work because fundamentals change. In such cases, we admit our mistake, cut our losses and move on.”

A fund with absolute return objectives generally is less volatile than other equity funds.

“The fund has been managed with a conservative bias. We don’t chase the market all the way up in bullish years. The result may be painfully wrong for a while but proves itself in the long run over various market cycles,” says Tan. “It does not offer top-of-the-range returns in any one year but is a good fund to have for most investors who seek reasonably steady returns from risky assets in the long run.”

Since its inception in March 2005, until end-January 2010, the fund’s annualized return has been 13.3% compared with the FBM KLCI’s annualized return of 7.3%. In months ahead, says Tan, the markets will likely be volatile within a trading range since interest rates are expected to go up sooner rather than later. “We will have a neutral allocation for stocks until the market is comfortable with the idea that rates have ‘normalised’ before weighing stocks again. Meantime, we will focus on a few selected stock. Meantime, we will focus on a few selected stock specific ideas, “says Tan, who expects the fund to stay in positive territory this year.