KUALA LUMPUR (June 3, 2013): Malaysia's unit trust industry is expected to grow by double digits this year, in line with the stock market's bullish performance and, to a certain extent, the uptake of Private Retirement Schemes (PRS).
"Yes, we expect growth in the unit trust industry this year because the equity market is doing well. The growth in the unit trust industry is in tandem with the performance of the equity market," Federation of Investment Managers Malaysia (FIMM) CEO Ahmad Zakie Ahmad Shariff told SunBizrecently.
The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) has been on a post-election rally and has gained 6.8% to date. Analysts are bullish on the performance of the stock market, with many predicting the FBM KLCI to surpass 1,700 points by the end of this year.
Zakie does not expect PRS, which saw the first product launch in October 2012, to be a major contributor to growth this year due to the scheme's voluntary element.
"The PRS is voluntary in nature and its contribution is dependant on disposable income. The more disposable income you have, chances are you would contribute more but if the disposable income is not that much then you have a problem," he said.
He also mentioned that the PRS would have to "compete" with other investment products such as real estate and precious metals, namely, gold. "These are the challenges that the industry has to face," he said.
In 2012, Zakie said, the local equity market performed well with the FBM KLCI increasing by 10.3% and closing at an all-time high at the end of the year.
According to FIMM's 2012 annual report obtained by SunBiz, "The net asset value (NAV) for unit trust funds increased 18.2% to RM294.8 billion as at end of December 2012, representing 20.1% of market capitalisation of Bursa Malaysia.
Private unit trust funds (excluding federal and state funds) saw NAV add a substantial 34.9% over the year and stood at RM142.6 billion as at end of December 2012.
"The year marked the sixth consecutive year of firm growth of Islamic funds with total NAV standing at RM44.2 billion as at end of 2012, an increase of 39.3% over the year despite heightened global market volatility and a challenging economic environment," the report, which is yet to be published, said.
Money market funds and bond funds maintained their upward momentum in 2012 with accumulated assets touching an all-year high of RM28.9 billion and RM19.0 billion respectively.
"Increased uncertainty in risky assets may have driven investors to seek solace in safe investments, including these fund sectors," it reported.
As at the end of 2012, money market funds and bond funds each made up 20.9% and 13.3% of the private unit trust funds' total assets. Meanwhile, conventional equity funds and mixed asset funds also accumulated significantly higher total NAV at RM27.6 billion and RM8.3 billion respectively.
As at the end of last year, the total number of wholesale funds (WSF) managed by FIMM members stood at 79 or 46.2% of total WSF launched in the market.
Funds managed by FIMM members saw NAV increase 1.3 times over the year, standing at RM36.8 billion, which collectively made up over 70% of the total assets of WSF at end-2012 (RM52.5 billion).
A record total of 53 funds were launched in 2012, whereby 75.5% were conventional and the rest Islamic.
The largest among the new funds launched were target maturity funds (19 or 35.8%), while money market funds added 12 new funds, in addition to nine bond funds and six equity funds.
Among new fund offerings, 33 or 62.3% are funds with more than 50% of assets mandated to be invested locally; whereas 20 funds or 37.7% were funds investing predominantly in overseas.
Other funds, including target maturity funds formed 10, or 50% of the foreign-focused funds.
Meanwhile, 15 or 75.0% of the foreign-focused funds were packaged as non-specialised unit rust funds and five or 25.0% were offered through feeder fund structure.
FIMM is a self-regulatory organisation that plays a key role in the development of the unit trust industry.
