Kuala-Lumpur based MBf Unit Trust Management, with over MYR400 million (USD105.2 million) under management, is looking at using over-the-counter derivatives within 12 months. "It could be a mixture of products," said Philip Tan, senior fund manager, noting that it is looking at both equity and fixed income derivatives for hedging its investment portfolio as well as purchasing structured notes. The fund manager has been looking at reentering the domestic OTC market since capital controls were introduced in 1998, but is waiting for liquidity to return. "It's still a young market--we need much more participation from players," said Tan, noting that it could take over a year. "Liquidity is still the main stumbling block," he continued.
While the domestic market may take some time to develop, Tan noted the Securities Commission of Malaysia is currently discussing a proposal to permit funds to increase their investments in overseas markets from 10% to possibly 30-50% of their total portfolio size. "If the proposal is accepted it would allow us to expand into more products," he said, noting that for instance it could then increase its investments in say, Japan and use OTC instruments to hedge the risk. He declined to comment on specific strategies, noting that it would probably take around 12 months until the liberalization takes effect.
