Concentrated portfolio of stocks or Index funds or Mutual/Hedge funds

How should I invest in the stock market?

Should I invest in my own selected stocks and manage my own portfolio?

Should I entrust my money to the fund managers in mutual funds or hedge funds?

Or, should I just buy an index-linked fund or an ETF?

Investing in mutual funds and hedge funds

The problem here is, as an aggregate, these funds underperform the market, after taking into consideration the costs incurred.  

Over a one year period, these costs maybe small, but over a long period, these costs compounded into a huge amount that is leaked out of your portfolio, not available to you to reinvest into your portfolio.

It is generally sound to avoid these funds, since there are better alternatives.

Investing in index linked funds or ETF

Index linked mutual funds have on the aggregate given you the chance to capture the returns of the market at low costs.    

They have in general outperformed the mutual funds and hedge funds, as a group over the long term.

Due to recent awareness of the performances of the mutual funds and hedge funds due to the higher costs involved, more and more money are flooding into index linked funds or ETFs.

Investing in a concentrated portfolio of  a selected group of stocks

I believe this is possible for those with a good and sound philosophy and method; who are hardworking, knowledgeable and disciplined.

These constitute less than 5% of the investors in the market.

An example of a sound philosophy:

• Know the business you are investing.
• The business has durable competitive advantage.
• The management has integrity and are capable.
• The company is available at a fair or bargain price.
• The investing time horizon is long term (> 5 years or more).
• Dividends are reinvested.

The stock markets have returned averagely about 10.5% per year for a long period.  The returns of the stock market over the short term is extremely volatile; inflation over this short period is small.   On the other hand, the returns of the stock market for any 5 years or more rolling period have always been positive.   Those who choose the "good quality stocks" bought at "bargain prices" can expect to perform better than the average and should have returns better than the 10.5% per year.

In summary:

1.   If you are knowledgeable, do invest on your own.

Own a concentrated portfolio of good quality stocks (those with durable competitive advantage).

Do not overpay to own them.

Keep them for the long term, reinvest the dividends, and allowing compounding to give you the higher returns.

2.   If you are not so knowledgeable, but still intelligent in your investing.

Go for index linked funds.

Do you have the uncanny ability to pick out the best mutual or hedge fund managers?  If you have, you may wish to park your money with them.  If not, avoid these products altogether and go for index linked funds or ETF.

A look at the mutual fund table

Take a look at the mutual fund table below:

Columns 1 & 2: 52-Week High and Low. These are the mutual fund's highest and lowest over the previous 52 weeks (1 year). This typically does not include the previous day's price.

Column 3: Fund Name. This column lists the name of the mutual fund. The company that manages the fund is written above the column in bold type.

Column 4: Fund Specifics. Different letters and symbols have various meanings. For example, a "*" means the fund is retirement account eligible, "N" means no load, "F" is front-end load, and "B" means the fund has both front and back-end fees. For other symbols, see the legend that accompanies the financial tables in your newspaper.

Column 5: Dollar Change. The dollar change in the price of the mutual fund from the previous day's trading.

Column 6: % Change. The percentage change in the price of the mutual fund from the previous day's trading.

Column 7: Week High. The highest price at which the fund traded during the past week.

Column 8: Week Low. The lowest price at which the fund traded during the past week.

Column 9: Close. The last price at which the fund traded.

Column 10: Week's Dollar Change. The dollar change in the price of the mutual fund from the previous week.

Column 11: Week's % Change. The percentage change in the price of the mutual fund from the previous week. 

Read more: http://www.investopedia.com/university/tables/tables4.asp#ixzz28JHnCUuf

Stocks Vs Unit trust or Mutual Funds

This question about stocks vs unit trust or mutual fund is a very broad one and it very much depends on your personal goals, as to which is better for you.
The first obvious difference between stocks and unit trusts is that for stocks, you have to do your own research in order to select which stocks to buy and sell, whereas for unit trusts you delegate the management of capital to the unit trust manager.
What this obviously means is that if you intend to buy/sell stocks on your own you will need to allocate a significant portion of your time into researching stocks and keeping an eye on your investments, and if you wish to manage a large portfolio this may take up a considerable amount of time. People who have full-time jobs in non-finance related industries may have difficulty devoting the amount of time necessary to produce a reasonable return on their investments. Heck, even those in finance industries are unable to find time to manage their own money. Indeed, deciding to plunge into stocks can be a costly experience especially in the early years when one has not gained the critical amount of knowledge and experience. The learning curve is steep and the costs involved in learning lessons, also called your 'tuition fee' can involve a significant hit to your capital base.
Thus the obvious alternative is to either let the money sit in the bank account or in fixed return securities (an option which I think is far underrated) or to delegate your capital into the hands of a investment manager. This presents another set of problems because now you have to evaluate the competence of the unit trust managers, and you also have to beware that you do not pay excessive charges. Furthermore, it is a well known fact that most money managers underperform the stock market indices despite the fact that investing in index funds involves much lower charges, since they are passively managed.
My answer to the question is that both stocks and unit trusts are good, depending on whether the investor is able to develop the competence and devote the time into learning about them and to evaluating their chosen vehicle of investment. Learning how to analyse individual stocks will involve learning how to analyse financial statements, competitive strategy, valuation and a whole host of other investment analysis tools. Learning how to evaluate unit trusts will require an understanding of macroeconomics and the various unit trust strategies (global macro/sector rotation/country analysis etc.)
In otherwords, it doesn't matter which approach you choose, if you want satisfactory results, you have to do your homework.
So, where does that leave the investor who does not have much experience or knowledge of investing and does not have the time to devote into acquiring it?
My answer is index funds. Yes. These are lovely since they outperform 2/3s of all actively managed funds over the long run. They involve low management fees and can give you peace of mind, as long as you are dedicated to investing for the long run (5+ years or more) and have the discipline to follow a simple saving/investment plan.
But of course, most people like to get their hands dirty and like the feeling of being in charge of their destiny - few want to be simply 'above average', they want to make lots of money.
Well, that is possible. If you have the brains, balls, and hardwork, you might be successful as an investor. But many have tried and have just ended up as mediocre underperforming investors who would have been better off just sticking their money in the index funds.
Which kind of investor are you? What risks are you willing to take?
That's a question only you can answer. 

http://www.sap-basis-abap.com/shares/stocks-vs-unit-trust-or-mutual-funds.htm

Performance fees warning

By Melanie Wright 

Published: 10:49PM BST 05 Aug 2010

1 Comment

Investors are being warned about paying over the odds for average performance on a new breed of funds – funds that pay performance fees to their managers.

Peter Hargreaves, the outspoken chief of financial advisers Hargreaves Lansdown, has lambasted performance fees, saying they were designed to benefit only the manager and provided no advantages for investors.

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One of Mr Hargreaves' main criticisms was that while managers that charge performance fees benefit when their funds do well, there is no penalty when funds do badly.

Philippa Gee of financial adviser Philippa Gee Wealth Management was also critical. "Let's be honest, if a fund were to deliver top-decile performance [in the best 10pc of funds] consistently over a five to 10-year period, and charged a performance fee that was not so ridiculously high as to eat into the extra returns, then most people would be happy to invest. But in reality it is not like that," she said.

"There are plenty of attractive funds to consider and most do not charge performance fees, so I would always tend to avoid recommending any fund that does charge them. There would have to be a very special reason to recommend a fund that comes with a performance fee and I haven't yet come across that reason."

The number of fund managers using performance fees has increased over the past couple of years and now includes companies such as JO Hambro Capital Management, Alliance Trust, Cazenove, Liontrust, Neptune, Octopus, Odey and SVM.

Performance fees are usually charged as a percentage of returns above a particular benchmark, such as an index or interest rate measure, so while you won't find yourself paying fees for underperformance, you could find yourself paying extra fees for ordinary or average performance.

According to research by Lipper, of about 40 open-ended funds that charge performance-related fees, more than half charge 15pc of net gains as their base fee and just two, Hiscox Global Financials and SVM Funds Global Opportunities, charge 10pc. The remaining funds have performance fees of 20pc. Some 135 investment trusts charge performance fees.

Ian Sayers, director general of the Association of Investment Companies, said: "Performance fees have a place. Some investors would rather pay when performance has been good than pay a flat fee regardless of how the fund has performed. The construction of the fee is, of course, extremely important, and they can become complicated, but that is often because the manager is trying to do the right thing."

Mark Dampier of Hargreaves Lansdown said that in some cases the ''hurdle'' rate that managers had to overcome before they could charge a fee was so low that it was easy to beat. "It's not unreasonable to expect investors to pay for superior performance, but managers should have a fee that relates to a high hurdle rate – often they are next to nothing," he said.

For example, some unit trusts' performance hurdle is to beat Libor – the rate that banks charge to lend to each other – which is currently at just 0.73pc for one month and 0.57pc for three months. Funds that use the three-month sterling Libor rate as a hurdle include BlackRock UK Absolute Alpha, SVM UK Absolute and Jupiter Absolute.

Tony Stenning of BlackRock said: "We consulted extensively with advisers in order to devise a methodology that was as fair and equitable to investors as practicably possible, while still providing a reasonable incentive to the fund's manager.

''Ultimately we decided the hurdle should be based on the key tool used to control economic conditions, that is, short-term interest rates. This would rise when arguably it could be easier to add value to the fund and vice versa when conditions are less benign."

The BlackRock fund also uses a "high water mark", meaning that the fund must beat the previous peak in net asset value before the performance fee kicks in again.

Darius McDermott, the managing director of discount brokers Chelsea Financial Services, said he was not against performance fees provided that managers offered value for money.

"The BlackRock UK Absolute Alpha fund has delivered 26.2pc over five years compared with the average UK All Companies fund of 20.4pc. This has been achieved with a low correlation to the UK market and in a much less volatile manner," he said. "Similarly, Gartmore UK Absolute Return is up by just under 10pc since it launched in April 2009.

"Both managers charge a performance fee but they have given investors good returns."

The same cannot be said of Bedlam Asset Management, which placed performance fees at the centre of its launch eight years ago. The group, named after the east London lunatic asylum, attacked fund management groups that charge investors even when they perform badly.

It opted for a no-gain, no-fee charging structure. If the net asset value of shares has increased by less than 1.25pc in a given quarter, then no fee applies for that quarter. If the return is above 1.25pc then a charge of up to 1.25pc is applied. However, it will not be charged if the fee taken would cause the return to be less than 1.25pc.

Bedlam's fund performance has been less than impressive, but at least investors have not had to pay through the nose. According to Morningstar, its UK fund returned 57.8pc, well behind the FTSE All Share index, which has risen by 86.7pc over the same period. Bedlam's worst performer is its Emerging Markets fund, which has returned 133.2pc since 2002, while its benchmark rose by 311.8pc.

If you are considering a fund with a performance fee, make sure you understand how it works. "If you went to buy a car, you wouldn't just say 'I'll take the red one' and walk out, you'd look under the bonnet and find out all about it," Mr Dampier said. "You need to go into any fund with your eyes open so you know exactly what the fund manager will get out of it and what you will be paying."

Check to see what the performance benchmark is and whether a high water mark applies. Clive Beagles, senior fund manager of the JO Hambro Capital Management UK Equity Income fund, said: "Performance-related fees are an important part of the incentive package for our fund managers and help us to attract high-calibre managers capable of generating outperformance for our clients over the long term. Critically, we apply a high water mark so that any fund underperformance is carried forward and no fee is payable until the underperformance has been recovered."

Remember, too, that total expense ratios, which show all yearly costs, often exclude performance fees, so check the small print to find what you will be paying. You should also see whether there are similar funds available that don't charge performance fees.

Ms Gee said: "Consistency is an important part of meeting investor expectations and the investment industry has to appreciate that the mistrust of the financial world is not aimed just at banking institutions and certain rogue financial advisers, but at fund management groups as well. They should tread very carefully in terms of how much of the cake they want to eat."

http://www.telegraph.co.uk/finance/personalfinance/investing/7929446/Performance-fees-warning.html

Related:

Another look at the performance fees of i Capital Global Fund & i Capital International Value Fund

Ah Yap's Blog: Tan Teng Boo’s i Capital Global Fund & i Capital International Value Fund Review (And An Update to ICAP)

More than meets the eye to fund charges

As high costs come under scrutiny we break down the typical fees.

By Paul Farrow
Published: 10:43PM BST 02 Aug 2010

5 Comments

More than meets the eye to fund charges

The Telegraph's revelation that we pay an extortionate amount in fund fees – about £7.3 billion every year – piles on the misery for British savers grappling with jittery stock markets and low returns.

When shares are soaring, little attention is paid to the amount in fees that investment companies rake in. But when fund values are falling, the costs paid by investors account for a greater proportion of their total returns – and it gets noticed.

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"Now we have consistently low inflation, charges represent a far higher proportion of any investment return than in years gone by," says Clive Waller at CWC Research, the financial analyst. "Charges matter."

Understandably, companies need to levy charges to cover their costs and return a profit. Even something as simple as sending out a policy statement costs money, particularly when they have tens of thousands of investors on their books.

Then there is the cost to the company of paying commission to salesmen and independent advisers. These are generally funded by customers, regardless of whether they buy direct from the fund management group or through an independent financial adviser.

Tom Stevenson, investment director at Fidelity, says: "Our portfolio managers are supported by hundreds of analysts, meeting companies, talking to their suppliers and customers and scouring balance sheets for the information that can give our clients an investment edge. This is a costly but, we believe, essential activity and it is reasonable that this should be reflected in the annual management charges of our funds."

But investors should check to see what they are being charged. If, as many experts predict, we are in for several years of subdued investment performance, it is important to look at more than just the annual management charge.

There is a raft of additional charges on both unit trusts and open-ended investment companies (Oeics). These include audit fees, dealing costs and servicing charges.

What is the annual management charge (AMC)?

This is the figure that is published on the fact sheet and is the fee that most savers – incorrectly – understand to be the amount they pay each year for the fund manager to run the fund.

Taking the typical AMC of 1.5 per cent, about two thirds of this is used to pay for research, wages and costs associated with physically managing the money within the fund. The remaining 0.5 per cent is paid out as "trail commission" to independent financial advisers or the fund provider each year for so-called "servicing costs".

Trail commission is a controversial charge. Critics argue that many advisers get this annual fee for doing next to nothing and question whether many deserve the remuneration, given that they do little to encourage their clients to switch out of perennial poor performing funds.

But the AMC doesn't tell the whole story on fund fees and charges – there is also the TER.

I've never heard of the TER. What does it stand for?

For a better idea of the cost of your fund, you should look out for the total expense ratio (TER). Unfortunately, investment fund companies are not obliged to reveal TERs and many will publish only the annual management fee, leaving investors with the mistaken impression that this is all they have to pay. It is not.

The TER takes into account dealing costs, stamp duty and auditors' fees as well as the annual management charge. You can often find TERs of more than 150 basis points above the annual management charge. Take Threadneedle Managed Income, for instance. Its AMC is just 0.25 per cent, which you may be mistaken in thinking is a bargain. However, the fund's TER is 1.77 cent.

So does the TER include all the costs that I pay?

I'm afraid not. The TER does not include the trading costs – the costs for buying and selling shares within the fund. The more active a manager is in trading the underlying portfolio, the higher these costs.

That said, investors have to expect some extra cost here: after all, you would be seething if your manager just sat on his backside all year. On average, trading costs can add another 1 per cent to your annual fees but some argue that managers buy and sell shares simply to rake in this extra revenue.

A higher TER will obviously cause a drag on performance. For example, a £7,200 fund investment growing by 7 per cent each year will reach £14,163 after 10 years, before charges. A fund levying an annual TER of 1.55 per cent would be worth £12,240 after 10 years, but a fund with a TER of 2.25 per cent would be worth be £788 less, at £11,452, according to Lipper, the fund analysts.

Can I compare the true costs of investing in different funds?

No. Trading costs range from about 0.09 per cent a year to one per cent. "The AMC is a quite useless figure; the TER is misleading because it is not total – it does not include dealing charges or, if it's a fund of funds, the charges on the underlying funds," says Mr Waller. "If the buyer knows exactly what the true cost is, he can compare fund manager performance against charges and make an informed decision."

How do fund charges vary?

Charges vary according to the type of fund and what it invests in. The fees levied on specialist funds, such as those investing in smaller companies, will almost certainly be a lot higher than those for funds that simply track indices, so-called tracker funds.

For example, the average UK equity fund has a TER of 1.6 per cent compared with the average corporate bond fund's TER of 1.15 per cent. Actively managed funds cost more to run than trackers because the latter are effectively managed by computer programs while the former incur the costs of researching individual stocks.

Mr Stevenson says: "Simplistic comparisons between the charges levied on actively managed funds and index-tracking or passive funds miss the point. The two investment approaches incur different levels of cost, so the question is not whether stock-picking funds should be more expensive than trackers (they are) but whether their higher charges are transparent and a fair reflection of the extra resources and effort involved."

So are cheaper funds better?

Not necessarily. It is fair to say that the lion's share of funds underperform time after time and many do not offer value for money.

The fund groups that charge the most argue that investors are better off paying extra for decent performance. However, a significant number of funds fail to deliver consistent above-average performance year in, year out, and if you are paying a high TER for dismal performance it is time for a rethink.

It is clearly worth paying a higher TER for consistent outperformance and a high TER does sometimes pay. Take Jupiter Merlin Balanced Portfolio. This popular selling fund has a TER of 2.3 per cent, which is higher than the average – yet it outperforms its peers regularly and is justifiably recommended by many investment advisers.

http://www.telegraph.co.uk/finance/personalfinance/investing/7923367/More-than-meets-the-eye-to-fund-charges.html

Thursday July 8, 2010

CIMB monitoring SJAM

KUALA LUMPUR: CIMB Group Holdings Bhd is monitoring the situation at SJ Asset Management Sdn Bhd (SJAM), which is currently being examined by the Securities Commision (SC) due to irregularities in its accounts.

Chief executive officer Datuk Seri Nazir Razak said: “We are concerned about this.

CIMB Bank Group Chief Executive Datuk Seri Nazir Razak delivering his keynote address at the CIMB Private Banking Conference 2010 on Wednesday.

“SJAM was one of two fund managers our private bankers had recommended to clients and by extension, some of them had invested in the asset management company.”

Asked if the investment by CIMB clients placed in SJAM was high, Nazir said high was a relative number. “The key thing is that even if it was one sen placed in SJAM, it’s our clients’ money.”

Beyond these facts, Nazir said he did not know more, except that the SC was examining SJAM’s records and that independent auditors had been called in to look closer at its accounts

http://biz.thestar.com.my/news/story.asp?file=/2010/7/8/business/6626594&sec=business

SC slaps SJ Asset Management with restrictions

SC slaps SJ Asset with restrictions
Published: 2010/06/30

The Securities Commission (SC) has stopped SJ Asset Management Sdn Bhd (SJAM) from taking care of fresh funds after its examination of the fund manager raised concerns.

In a statement yesterday, the regulator said that with immediate effect, SJAM was prohibited from soliciting new mandates and to maintain and preserve all records in relation to clients' trades and payments.

"On-site examination as well as findings of BDO Consulting Sdn Bhd (BDO), which was appointed to assist in examining SJAM's books, accounts and records, have raised certain concerns," the SC said.

It did not say what the concerns were nor why it had asked BDO to do the job.

The SC has also instructed BDO to further examine, audit and report on SJAM's books, accounts and records, inclusive of assets held.

It said that over the last two years, it had intensified regulatory review and scrutiny over asset management companies.

SJAM, a licensed fund company incorporated in 1992 manages regional investments in Japan, Hong Kong, Singapore, Thailand, Indonesia, the Philippines, Taiwan and South Korea.

Its investment products include

• fund management, 
• managed portfolio, 
• investment services and 
• private equity accounts.

Whai Onn Tan is the managing director of SJAM, while Datuk Kamaruddin Hamzah, who sits on the board of directors of a few public-listed companies, is the director of the company.

Whai is also the head of fund and portfolio management.

Both Whai and Kamaruddin are also the owners of SJAM Holdings Sdn Bhd, the parent firm of SJAM.

Based on the company's website, SJAM has authorised capital of RM10 million and paid-up of RM6.38 million.

Its investment portfolio targets active, quality-growth companies with reasonable prices.


Read more: SC slaps SJ Asset with restrictions http://www.btimes.com.my/Current_News/BTIMES/articles/sjay-2/Article/index_html#ixzz0sK5GySrV

Now, Mr Tan Teng Boo has so many things to sell you other than his newsletter.

Tan Teng Boo’s i Capital Global Fund & i Capital International Value Fund Review (And An Update to ICAP)

Apr 29th, 2010 by AhYap

A few years ago, Tan Teng Boo had only one thing to sell you, his newsletter.

Later he launched his first public fund known as theiCapital.biz Berhad (ICAP) listed in KLSE which I did a long review long long time ago. [iCAP review]

But last few years, he subsequently launched 2 other funds to sell to you, namely the iCapital Global Fund and theiCapital International Value Fund.

Due the the iCapital Global Fund big minimum investment requirement (USD200k!), many are kept out of the boat and so he launched his “International” fund in Australia later that requires only AUD20,000 minimum, so more people can join the “global investing” boat.

Now, Mr Tan has so many things to sell you other than his newsletter.

Some of these stuffs are good stuffs to buy, some are …

Read more:  at Ah Yap's Blog


Related:

A reputation build over 30 years can be destroyed in 5 minutes.

Investment Policies (Based on Benjamin Graham)

Quote: 'Profit from the information and inefficiencies of the market'

Top unit trust companies recognised

Top unit trust companies recognised

Written by Joy Lee
Wednesday, 24 February 2010 00:00
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KUALA LUMPUR: Top-performing unit trust funds in the country were acknowledged at The Edge-Lipper-StarMine Awards 2010, held here yesterday.

Public Mutual Bhd maintained its winning streak as the biggest winner for the seventh consecutive year, sweeping 10 out of the 29 awards, including the most prestigious Best Overall Group award.

AmInvestment Services Bhd retained its award for the Best Bond Fund Group and Pacific Mutual Fund Bhd took home the Best Equity Fund Group and the Best Mixed Assets Fund Group awards.

In addition, the year's top brokers and analysts were honoured in The Edge-StarMine Malaysia Brokers Rankings and The Edge-StarMine Malaysia Analyst Awards.

Kim Eng Research Sdn Bhd was ranked top for earnings estimates in the mid- and small-cap stocks category as well as the FTSE Bursa Malaysia 30 Index category.

Norziana Mohd Inon of CIMB Investment Bank Bhd took home the award for Malaysia's top analyst. Annuar Aziz of Credit Suisse Securities (Malaysia) Sdn Bhd and Ahmad Maghur Usman of OSK Research Sdn Bhd came in second and third respectively.

Zarinah (centre, front row), Ho (5th from left), Soo (4th from left), Yusli (3rd from left) and Lee (2nd from left) with winners of the Edge-Lipper Fund Awards. Photo by Mohd Izwan Mohd Nazam

The event was graced by Tan Sri Zarinah Anwar, chairman of Securities Commission, as guest of honour. Also present were Bursa Malaysia CEO Datuk Yusli Mohd Yusuf, The Edge Malaysia editor-in-chief Ho Kay Tat, Thomson Reuters Malaysia senior company officer Simon Soo Hu and the Federation of Investment Managers Malaysia's Lee Siew Hoong.

The winners of the awards are determined based on the Lipper Leader ratings for consistent return, a risk-adjusted investment performance return measure developed by Lipper.

A total of 25 classification awards covering 13 eligible fund categories and four group awards were given out this year, including Islamic funds that topped their respective Lipper classifications.

http://www.theedgemalaysia.com/business-news/160230-top-unit-trust-companies-recognised.html

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.

http://www.theedgemalaysia.com/business-news/160231-sc-to-amend-unit-trust-fund-guidelines.html