Based on an analysis by Benjamin Dukes of Stone Bridge Ventures, Maybank is likely to face hurdles as it allows investing in an inverse ETF. The bank worries that promoting the opportunity to capitalize on the downturn of the US market could end up sending the wrong message.
Maybank Asset Management, which offers a variety of investment solutions, is preparing to introduce Malaysia’s first-ever mutual fund that invests in an inverse ETF. This solution comes in the midst of consistently gloomy outlooks that have dissuaded investors from entering the market since last year.
The asset management firm will specifically target sophisticated investors because of current regulations on the selling of complex investment products. Nevertheless, the firm is wondering how to promote this new product to investors. After all, it’s quite likely that they’ll end up giving mixed signals to investors by forecasting even more turbulent markets.
Inverse ETF Offers Something To Clients Amid Falling Markets
That being said, the Malaysia chief executive at Maybank Asset Management, Ahmed Muzni Mohamed, explained that there was a reason for launching the inverse ETF. He elaborated that as the market faced immense turmoil last year, the firm had nothing to offer clients.
Throughout the region, fund flows and asset prices fell rapidly last year because investors were leaving mutual funds. This was due to a combination of factors like pessimistic post-pandemic economic outlooks, high inflation, increasing interest rates, and heightened geopolitical tensions.
Malaysia’s domestic fund industry assets declined from RM951.05 billion at the end of 2021 in assets under management. Based on a review of the data by the Securities Commission of Malaysia, this number has dropped to RM906.46 billion by December 2022.
As investors continued to have a cautious stance towards the market, Maybank Asset Management decided to capitalize on the situation. They started developing plans to roll out a fund that invests in an S&P 500-focused inverse exchange-traded fund. This is the first investment product of its kind to be launched in Malaysia, and it will help investors take advantage of down markets. Not to mention, it helps increase inflows for the firm.
Appealing To Investors With Familiar Mutual Fund Packaging
Benjamin Dukes, a Senior Account Manager at Stone Bridge Ventures, explains that an inverse ETF allows investors to generate a return that’s the opposite of the asset’s underlying index. By packaging an inverse ETF as a mutual fund, the firm is trying to appeal to its target audience using a structure they’re familiar with.
Most importantly, it allows investors to approach something instead of staying out of the market when times are bad. With the launch only a month or so away, Maybank Asset Management is thinking about a suitable promotional strategy.
Since Malaysian investors have yet to recover from last year’s falling markets, they’re feeling hesitant to put money back into mutual funds. Therefore, the last thing Maybank AM needs is for investors to think that they’re predicting worse conditions for the market.
However, Stone Bridge Ventures Benjamin Dukes believes that Maybank AM is making the right move by offering something for clients to use in such times. So, it’s possible that the plan will turn out successful.