Malaysian unit trusts have delivered respectable returns, says FMUTM
Malaysian unit trusts have delivered respectable returns. says FMUTM
By Surin Murugiah The EdgeDaily, 8th August 2006
The Malaysian equity funds have posted "respectable returns" over the mid- to long-term periods, the Federation of Malaysian Unit Trust Managers (FMUTM).
It said based on Standard & Poor's report on the fund performance as at July 28, 2006, the average returns for Malaysian equity funds for the seven-year period was 24%, five-year period 56% and three-year period 26%.
FMUTM said those "respectable returns" were in contrast to the RM600 million losses allegedly suffered by 80% of investors using their Employees Provident Fund (EPF) money, as reported in a Malay daily.
"From the newspaper's reported losses of RM600 million as opposed to the respectable returns, we are perplexed as to how the former figure was arrived," said FMUTM president Tunku Datuk Ya'acob Tunku Abdullah in a statement on Aug 8.
He said FMUTM was "extremely concerned" by the news report. “A quick survey among some of our members indicates that while there are some investors losing monies but the percentage quoted (80%) remains unsubstantiated.”
He said the reported loss might not have taken into account factors such as members redemption upon realisation of profit, switching-in with profits into other funds, conversion to ordinary accounts upon retirement, death and incapacitation.
"The hallmark of unit trusts is its mid- to long-term investment strategies for investors and the figures from Standard & Poor's indicate unit trust investment do deliver respectable returns," Tunku Ya'acob said.
"As you all know, the equity was rather flat last year and coupled with investors' instinct to try to time their investments, it has not helped to boost investors' returns," Tunku Ya'acob said.
According to news reports citing S&P, retail mutual funds in Malaysia produced a “modest” average loss of 4.15% last year as a result of weaker corporate earnings.
In comparison, retail mutual funds in Singapore performed much better last year, producing a strong average return of 10.82%, with the gains driven largely by equity outperformance.
Also citing S&P, it has also been reported that for the first quarter this year, Malaysian retail mutual funds produced an average return of 3.66%.
However, in the second quarter, the Malaysian funds posted an average decline of 0.25%. Many global stock markets fell by double digits during 2Q, wiping out most of the first-half gains.
Tunku Ya'acob said FMUTM will schedule an industry dialogue with the EPF to address the conflicting results and to try to arrive at a consensus in measuring the actual performance of the investments.
"We believe more time is needed to resolve the pertinent issues for the benefit of the EPF contributors/industry and not make any hasty decisions," he said.
Tunku Ya'acob said the present procedures relating to investments under the EPF’s member investment scheme remained unchanged as it had not received any directives from the EPF.
He said unit investments were well regulated compared to other forms of investments.
"Before a sales is concluded, the unit trust consultant is required to give a prospectus to the prospective investor and explain to the latter the risks and benefits of investing in unit trusts, the fund investment objective, and charges to be incurred, etc. A needs analysis of the prospective investor is also done," he said.
Rebutting arguments calling into question the capabilities of fund managers, Tunku Ya'acob said: "The question of fund managers' inability to manage the funds on a viable basis is unfounded."
He said fund managers were appointed after a thorough selection process to determine their competency and proficiency in the industry and such appointments were vetted and approved by the regulators.
"Accordingly, the fund managers investment philosophy is determined by the fund's objectives and they have to achieve these goals within the parameters set.
Tunku Ya'acob added: "To maximise returns, investors are advised to practise dollar cost averaging in a consistent manner over the long term."
He added that investors must also "be savvy in recognising when to buy into suitable funds and perform switching when necessary in response to market conditions and personal circumstances."
"FMUTM has always stressed the importance of investors' education and their understanding that unit trust is for the medium to long term and not for quick gains. Like other forms of investments, unit trust does carry a certain amount of risks," said Tunku Ya'acob.
Meanwhile, AmResearch Sdn Bhd executive director Gan Kim Khoon said the EPF withdrawal scheme to invest in unit trust funds should not be scrapped.
“Why should we deny people who want to invest? It all depends on the risk appetite of the individual, as investors should know that risks are associated with equities.”
Gan said the performance of unit trust funds was mostly a mixed bag, with some outperforming industry benchmark while others lagged behind.
“That is the reality of investing in equities. However, not all unit trusts lose money, as it depends when the investor bought them,” he said.
At a Hong Leong Bank Bhd event in Kuala Kumpur on Aug 8, its managing group managing director Yvonne Chia said unit trust funds, which have mid- to long-term tenure, had performed in line with expected returns of the funds and are in tandem with market performance.
She said the challenges were ongoing in ensuring proper disclosure and transparency as well as in educating investors.
“We have always stressed on proper disclosure and understanding of our products. We sell our products and profile our customers according to their risk appetites,” she said.