Posted by Kenneth Vertudez > 2013-08-06 10:20 | Report Abuse

Rgding the 3rd party ratings, Any other ratings for unit trust in Malaysia besides Lipper & morningstar ratings?

Posted by kcchongnz > 2013-08-06 10:31 | Report Abuse

This is my personal assessment of Malaysian unit trust funds. To my surprise, they did pretty good as a whole.

Is it a good idea to invest through unit trusts? Which local equity fund is the best?

Once I asked a forumer who has been posting unit trust funds in i3investor what is the average and median CAR of the unit trust funds in Malaysia. He came back and asked me what CAR is. So I have no choice but to go to the Fundsupermart website myself and compiled and tabulate the compounded annual return (CAR) of the equity funds invested in KLSE for the 1, 3 and 5 years.

From the website, there are a total of 68 local equity funds investing in the KLSE. The average 1-year average and median return is both about 15%, 3 years 12.2% and the 5 years 11.6% as shown below:

Table 1: Fund performance in %
Years 1 3 5
Average 15.2 12.1 11.7
Median 14.9 12.3 11.6
Stdev 5.2 3.8 3.5
No.>KLSE 55 51 49
81% 75% 72%
Max 28.5 22.0 20.8
Min 3.6 3.6 4.0
KLSE 10.80 9.90 9.30

How is the past performance of the funds as a whole? My opinion is they did pretty well. The average returns of the unit trusts outperformed KLSE for all holding periods of 1-year, 3-year and 5-year by 4.4%, 2.2% and 2.4% respectively. 81% of the unit trusts outperformed KLSE for 1-year, and 72% for the 5-year. Even if one invested in the worst performer, he still earns more than the fixed deposit, assumed to be about 3.5%. Wonderful! I think I should make some observations as below:

1. The stock market, especially Bursa Malaysia, is far from efficient.
2. The fund managers in Malaysia are better than those from the US as research has shown that US fund managers under-perform the broad market as a whole. But it could also be due to the inefficiency of KLSE that enable them to out-perform.
3. The performance of the good fund manager are pretty consistent too. For example, Philip Capital Master Growth Fund is the No. 1 for the 1-year return of 28.5%. It also did pretty well for the 3-year and 5-year return of 18.4% and 20% respectively. Similar consistency is shown by the top fund for the 3-year, Kenanga Growth Fund at 22%, and MAAKL-HDBS Flexi fund for the 5-year as shown in Table 2 below.

Table 2: Top fund managers, % CAR
Year 1 3 5
1-year PC Master growth fund 28.5 18.4 20.0
3-year Kenanga Growth Fund 22.3 22.0 20.0
5-year MAAKL-HDBS Flexi Fund 20.9 20.5 20.8

My conclusion is that it may be a good idea for ordinary people who have not much knowledge and wish to invest in the equity market to invest in the local unit trust funds.

For individual investor, how is your return compared with the market? How is it compared to unit trusts funds?

Please note this article is just for sharing purpose. I am not a unit trust agent, neither am I a financial advisor.

kcchongnz