Wong stresses that discipline matters more than market timing. Holding cash as “optionality” and diversifying into alternatives, he says, helps investors stay steady through cycles. .—SAMUEL ONG/The Star
FOR most Malaysian investors, wealth planning begins and ends with the familiar duo of equities and bonds. Yet Areca Capital Sdn Bhd’s chief executive officer, Danny Wong, argues that a robust strategy may require looking beyond these pillars.
“If you confine yourself only to equities and bonds, you may miss out on opportunities to better manage risk and capture varied forms of return,” he says.
Wong believes investors should consider a broader toolkit – private credit, commodities and digital assets. Not as speculative sidelines, but as possible complementary components of a diversified portfolio.
“It’s not about chasing the exotic. It’s about helping your wealth better withstand cycles, inflation, and changing market structures.”
Among these alternatives, one area Wong is particularly enthusiastic about is private credit.
In Malaysia, small and medium-sized enterprises (SMEs) form the backbone of the economy but faced an estimated financing gap of nearly RM140bil in 2024.
This estimate builds on a 2017 International Finance Corporation (IFC) and World Bank study, which placed the MSME financing gap at RM92.24bil then. Extrapolated in line with Malaysia’s GDP growth, the shortfall in 2024 would stand between RM130bil to RM140bil, underscoring the scale of unmet need.
Banks remain the main pillar of financing in Malaysia, but SMEs often require additional forms of support alongside traditional facilities. Regulations and economies of scale naturally shape banks’ focus, while equity or bond market fundraising, – though valid channels – may not always be the most practical route for smaller firms due to size, cost and process considerations.
This is where private credit can step in as a complementary option. “Investors want new opportunities to invest, and businesses want alternatives where banks or markets may not fully meet their needs,” Wong says.
He recalls a mid-sized developer who needed capital to advance a project. For banks, the facility was too small to justify the same effort as a larger transaction, and issuing bonds was equally impractical. Through a wholesale fund, Areca structured an investment into the company, backed by additional collateral and assets for comfort. The arrangement helped safeguard investors while enabling the company to proceed.
The outcome was mutually beneficial: the developer completed the project, investors earned stable returns and the business continued to grow.
“Many of today’s listed companies began as small enterprises. With the right support, including private credit as a complementary option, SMEs may be better positioned to sustain, expand and over time, potentially grow into large or even public-listed corporations,” Wong notes.
This local relevance mirrors a global shift. Globally, private credit has solidified its emergence as a major asset class, having experienced substantial growth in its assets under management, according to Preqin, a global data provider on alternative assets. Asia-Pacific, though still smaller, is growing quickly as investors search for yield and diversification.
Wong views this as an opportunity for Malaysians to participate carefully in a global trend influencing institutional portfolios.
But private credit is just one piece of the alternatives puzzle. Other assets, he stresses, must be approached with discipline like commodities, for example.
“They may be useful when conditions make sense – such as during periods of high inflation or supply shocks – but not as a long-term anchor,” Wong says.
History bears this out: commodities have at times outperformed equities, such as in the inflationary 1970s and with a rise of nearly 20% in 2021 amid post-pandemic supply pressures. Gold is often viewed as a safe haven, while energy and agriculture respond to geopolitical swings. Still, Wong warns that exposure should remain modest.
If commodities demand caution, cryptocurrencies require even greater care. On this, Wong strikes a measured tone.
“It has no underlying cash flow, so you cannot value it the way you do an equity or a bond. But you cannot ignore its growing presence, especially with younger investors,” he says.
He notes the appeal of scarcity, particularly Bitcoin’s fixed and limited supply, and sees it as a potential hedge in uncertain times. Still, he cautions that any allocation should be small – only what investors can afford to lose.
But no matter the asset class, Wong stresses that investor behaviour ultimately makes or breaks portfolios.
“When markets are euphoric, people rush in. When markets fall, they panic and sell. Both extremes are dangerous,” he cautions. He advises clients to hold 10-20% in cash as a form of “optionality”– a buffer that allows them to seize opportunities instead of being forced to sell in downturns.
This disciplined use of cash, combined with diversification into alternatives, may create what Wong calls a “more resilient portfolio”.
“Sometimes you sail with the wind, other times you reef the sails. The important thing is to stay on course,” he says.
Holding cash is about being prepared for the unexpected, but also for the new. Readiness gives investors flexibility to defend when needed and to participate when opportunities arise. This same principle applies at the market level: just as investors need buffers, financial systems also need frameworks that allow innovation to grow responsibly.
One example is private credit. Once seen as a niche is now gradually moving toward mainstream recognition. With clearer frameworks and supportive regulation, it can be positioned as a “legitimate” asset class that connects the needs of growing businesses with the portfolios of long-term investors. As Wong notes, this evolution depends on a regulatory environment that safeguards trust while fostering innovation.
Against this backdrop, Wong frames Areca’s role as more than just managing funds.
“We are partners in wealth. Our responsibility is to help clients build portfolios that can stand the test of time,” he says.
For investors willing to broaden their horizons, the message is increasingly relevant: the world of wealth management is evolving beyond a sole reliance on equities and bonds.
Disclaimer:
This article is provided for general informational and educational purposes only and does not constitute, and should not be construed as, professional financial, legal, tax or investment advice.
Any views, examples or references contained herein are generic in nature and do not take into account the specific investment objectives, financial situation, risk tolerance or particular needs of any individual. Readers are strongly encouraged to seek independent advice from qualified professionals before making any financial or investment decisions.
Investors should read and understand the relevant disclosure documents of the respective funds prior to investing. While the information contained in this article is derived from sources believed to be reliable as at the date of publication, Areca does not make any representation or warranty, express or implied, as to its accuracy, completeness or reliability.
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