Thursday 19 June 2014

Liberalization of the Unit Trust industry (2)

"Wammo" commented on my previous posting: "Check out the performance of local funds on Fundsupermart - very few stand-out performers".

I have used his link to fund selector of Fundsupermart. I used the criteria:
  • Main Categories: "Equity"
  • Geographical sector: "Malaysia"
  • I looked for funds with at least a 3 year track record
These are some of the disappointing funds that I found:


Please be informed that the above numbers exclude any initial sales charge. In other words, for an investor the returns are even worse.

In comparison, this is the graph of the CI, since 1994, highlighted the last 10 years:

Fund managers have nothing to complain about, the market went up from 820 to currently 1877, a rise of 129%, or annualised 8.6%. Any fund manager worth his salt, with a disciplined attitude towards value investing should easily beat the return of the CI in the longer term.

And they are supposed to do exactly that, that is what they are paid for in the first place through the yearly management fees. Otherwise a low cost index-tracking ETF makes more sense.

The average 10-year performance over all Malaysian equity funds is 9.7%, not that bad, at least one per cent more than the index. But the outperformance will most likely be lost by the initial sales charge, which can range up to a whopping 5%. I strongly recommend investors never to pay more than 2% in sales commissions, preferably less.

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