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Chapter 10 Unit Trust

Unit trusts, also known as mutual funds, allow investors to pool their money together into a portfolio that is managed by a professional fund manager. The document discusses the different types of unit trusts, including balanced funds, equity funds, exchange traded funds, fixed income funds, index funds, international equity funds, money market funds, real estate investment trusts, and Shariah funds. It also outlines the process of investing in a unit trust in Malaysia, including the roles of the fund manager and trustee. Some advantages of unit trusts include easy diversification and professional fund management, while disadvantages include extra costs and potential dilution from large cash flows.

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80 views

Chapter 10 Unit Trust

Unit trusts, also known as mutual funds, allow investors to pool their money together into a portfolio that is managed by a professional fund manager. The document discusses the different types of unit trusts, including balanced funds, equity funds, exchange traded funds, fixed income funds, index funds, international equity funds, money market funds, real estate investment trusts, and Shariah funds. It also outlines the process of investing in a unit trust in Malaysia, including the roles of the fund manager and trustee. Some advantages of unit trusts include easy diversification and professional fund management, while disadvantages include extra costs and potential dilution from large cash flows.

Uploaded by

wanytaufik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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UNIT TRUST / MUTUAL FUND

1. What is unit trust?

❖ Unit Trusts are a form of collective investment that allows investors with similar
investment objectives to pool their funds to be invested in a portfolio of securities or
other assets. A professional fund manager then invests the pooled funds in a portfolio
which may include the asset classes listed below:
● Cash
● Bonds & Deposits
● Shares
● Properties
● Commodities

2. Types of unit trust.

● Balance Funds.
To lessen the risk of investing in a single asset class, some investors may desire to diversify
their portfolio among all main asset classes. A balanced unit trust fund's portfolio typically
includes stocks, fixed-income assets, and cash.

● Equity Funds.
An equity unit trust is the most common type of unit trust where its concentration of investments
is focussed in equities or securities of listed companies. Equity unit trust funds are popular in
Malaysia as they provide investors with exposure to the companies listed on Bursa Malaysia.
The performance of the units is therefore linked to the performance of Bursa Malaysia. A rising
market will normally give rise to an increase in the value of the unit and vice-versa. There is a
wide array of equity unit trusts available in the market, ranging from funds with higher risk,
higher returns to funds with lower risk, lower returns.

● Exchange Traded Funds (ETF)


An ETF is a linked unit trust fund whose investing goal is to match the performance of a specific
market index. ETFs typically have low expense ratios and may be purchased and sold at any
time during the trading day through a broker or on an exchange.

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● Fixed Income Funds.
Malaysian government securities, corporate bonds, and money market instruments are the
primary investments of fixed income funds. A fixed income fund's goal is generally to offer
consistent income.

● Index Funds.
These funds invest in a range of companies that closely match companies comprising a
particular index.

● International Equity Funds.


The International Equity Fund is an active investment fund with a portfolio of international stocks
and equity-based financial products that strives to generate growth through capital gains and
income.

● Money Market Funds.


Money market funds invest in short-term government securities and liquid, low-risk money
market instruments, which are effectively short-term deposits (loans) to financial institutions and
other low-risk financial institutions. As a result, money market funds have a reduced risk profile
and give more consistent income returns.

● Real Estate Investment Trusts (REITS)


REITs invest in real estate, often major commercial properties, and let investors engage in the
realty market in the first place that is typically unavailable to small-time investors. REITS, on the
other hand, allow you to invest a little amount and acquire exposure to the property market while
also diversifying your portfolio.

● Shariah Funds.
Shariah funds invest in Shariah-compliant assets, which exclude enterprises that engage in
activities such as products, or services linked to traditional banking, insurance, and financial
sectors, gambling, alcoholic drinks, and non-halal food items.

3. Unit trust process flow/ procedure in Malaysia.

➔ Fund Manager

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A management company is commonly known as the fund house/fund manager that establishes
a unit trust fund in Malaysia. In addition, units of a fund offer investors to subscribe or purchase
the fund’s units and operate and manage the fund.

➔ Trustee
A trustee is a trust company registered under the Trust Companies Act 1949 or incorporated
under the Public Trust Corporation Act 1995. The custodian of the fund’s assets and responsible
to monitor the administration of the fund by the management company to safeguard the
investors’ interests.

➔ Unit holder
Investors who own the fund in the form of units. Then, it also received income distributions as
well as capital gains in return. Income distributions are generally reinvested into the fund.

4. Provide 4 example of unit trust company in Malaysia and their background.

- AFFIN-HWANG ASSET MANAGEMENT BERHAD


➔ Affin-Hwang Asia Pac (Ex Japan) REITs and Infrastructure Fund (NonIslamic,
EPF Approved, Equity Fund)
➔ Affin-Hwang AIIMAN Growth Fund (Islamic Fund, EPF Approved, Equity Fund)
➔ Affin-Hwang Select Opportunity Fund (Non-Islamic Fund, EPF Approved, Equity
Fund)

- AMANAH MUTUAL BERHAD


➔ AMB Dana Nabeel (Islamic Fund, EPF Approved, Money Market Fund)
➔ AMB Dana Arif (A-MYR) – Retail (Islamic Fund, EPF Approved, Sukuk/Income
Fund)
➔ AMB Shariah Value Plus Fund (A-MYR) – Retail (Islamic Fund, NonEPF
Approved, Equity/Growth Fund)

- CIMB-PRINCIPAL ASSET MANAGEMENT BERHAD


➔ CIMB Islamic Asia Pacific Equity Fund (Islamic Fund, EPF Approved, Equity
Fund)
➔ CIMB-Principal Global Titans Fund (Non-Islamic Fund, EPF Approved, Equity
Fund)

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➔ CIMB-Principal Asia Pacific Dynamic Income Fund – MYR (NonIslamic Fund,
EPF Approved, Equity Fund)

- KENANGA INVESTORS BERHAD


➔ Kenanga Growth Fund (Non-Islamic Fund, EPF Approved, Equity Fund)
➔ Kenanga Syariah Growth Fund (Islamic Fund, EPF Approved, Mixed Assets
Fund)
➔ Kenanga Asia Pacific Total Return Fund (Non-Islamic Fund, EPF Approved,
Equity Fund)

5. What are the advantages and disadvantages of investing in unit trust?

Advantages Disadvantages

● Easy Diversification - Your fund ● Only One Way to Purchase


manager will invest the pooled funds Securities - A unit trust's
in equities, bonds, and shares, investments can only be purchased
among other things. You'll be able to directly from the trust's issuer. There
benefit from diversification as a unit will be no comparing brokerage
trust investor. rates, commissions, or moving
● It will also be easier to sell some or brokers with unit trusts.
all of your holdings in a fund than it ● Your single trust issuer is your only
will be to liquidate it on the market option. In other words, your
directly. convenience is purchased at an
uncompetitive price.

● Fund Are Managed By Fund ● Extra Costs - Since a fund manager


Managers - Since the money pooled is in charge of your unit trust, you
into unit trusts is handled by a fund should be aware that their services
manager with the skills and will come at a cost to you as an
know-how to adequately diversify investor. You're essentially
your collective investment portfolio, employing someone to perform a
unit trusts are ideal for novices and task - or in this case, a service – for
busy people. you.
● It's a win-win situation since you'll be ● As a result, be prepared to pay

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able to invest in a higher-yielding annual management fees and other
vehicle than fixed deposits, and your extraneous costs, which you should
fund manager will be able to take a measure against the worth of the
part of your gains as payment for his investment you'll receive in order to
services. keep a profit.

● Fees for stockbrokers can be ● Possibility of Dilution - Every time


negotiated lower - Investors may be shares are purchased, brokerage
able to use their financial clout to and acquisition costs will be levied,
force brokerage fees down if the resulting in a cash outflow that could
pooled sum is substantial enough. be significant. The percentages of
Even if the change in percentage is the investors' underlying assets will
only a few decimals, you can save a fluctuate as a result of large cash
lot of money. inflows and outflows. The great
● Consider the following scenario: news is that dilution won't endure
Even 0.1 percent of RM1,000,000 is indefinitely, and if the financial
RM100,000, so if you could lower decision was sound, it will pay off.
your stockbroker's costs by 0.5
percent, you'd be saving RM50,000
in no time.

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