Wednesday, 24 February 2010

SC to amend unit trust fund guidelines

SC to amend unit trust fund guidelines

Written by Joy Lee
Wednesday, 24 February 2010 00:03
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KUALA LUMPUR: The Securities Commission (SC) will be amending the guidelines on unit trust funds to meet the varying needs of investors, its chairman Tan Sri Zarinah Anwar said.

"The industry is developing and we have to innovate. We have to find new ways and better ways of doing things. Investors need more choices. So the idea behind the amendments is to allow greater flexibility in terms of offering choices to investors to meet their needs," she said.

Speaking to reporters after The Edge-Lipper-StarMine Awards 2010 here yesterday, she said the amendments were being worked on and would be published as soon as they were ready.

The SC is open to suggestions on new fee structure, says Zarinah.

Zarinah said the amendments would include offerings in multiple currencies.

"We are encouraging unit trust funds to be distributed overseas, and it will facilitate investment by foreign investors, for example, who may find it difficult to cope with exchange rate vagaries," she said.

The amendments would also facilitate a multi-class structure for unit trust funds whereby a single unit trust fund will be able to offer multiple classes of units over a single investment pool, with each class of units having different features such as the fees and charges imposed and the currency in which it is denominated.

Investors are becoming more aware of the effects of fees on their long-term returns and Zarinah believes that the market is ready for new fee configurations that more appropriately match service levels, resource capacity, quality and performance. "The SC is open to such propositions," she said.

In her keynote address, she noted that the unit trust industry had done extremely well with total funds hitting 541 with a total net asset value (NAV) of RM191.7 billion as at the end last year from 43 funds with total NAV of RM28.1 billion in 1993. The NAV makes up 19.18% of the capitalisation of Malaysia's stock market.

The industry continued to contribute significantly to the development of Malaysia's capital market by helping build the demand side and played an important role in channelling capital into the real economy, she added.

However, she said the challenge moving forward was to sustain this performance and to develop the depth and breadth of the industry.

To this end, Zarinah said SC had come up with two initiatives to provide confidence to investors that their investments would receive an appropriate level of protection and oversight as well as a facilitative regulatory framework for unit trust funds to operate in.

The industry must also continue working towards expanding the range of products and markets, she said. Malaysia has a competitive advantage as an Islamic capital market hub and currently, there are 144 syariah-compliant unit trust funds.

"As part of our efforts to facilitate market expansion for the industry, we had, as a start, inked the Mutual Recognition Agreement with the Dubai Financial Services Authority and another, more recently, with the Hong Kong SFC to enable cross-border distribution of Islamic funds on a bilateral basis.

"Our unit trust intermediaries have become one of the best in the region and are well-positioned to play a significant role in the regional arena. The industry must now rise to the challenge of broadening our connectivity with other markets and to increase its competitiveness on an international level, taking advantage of the facilitative regulatory framework that has been established," she said.

She noted that the unit trust industry must also increase its efforts to broaden distribution channels and reach both domestically and internationally.

Relying solely on traditional channels and existing distribution structures and approaches was not a sustainable solution, she said, as excellence in distribution capabilities is key to any industry that seeks to be internationally competitive.

"It would be worthwhile for the industry to also critically examine whether there is a need to focus on size to benefit from economies of scale given that close to half of the unit trust funds we have today have NAVs of RM50 million and below. The industry will have to compete for a share of investors' wallet and will benefit from finding better ways of doing things and passing on the cost savings to investors," she said.

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