Tuesday, 17 June 2014

Liberalization of the Unit Trust industry

Article in The Edge Malaysia: "Local players not ready for unit trust liberalisation":

"Local unit trust management companies (UTMCs) are not ready for full liberalisation of the local unit trust industry, Permodalan BSN Bhd chief executive officer (CEO) Kamarul Izam Idrus said, adding that they still need more time to prepare themselves. "While we welcome the idea to liberalise the unit trust industry, we feel that it would greatly impact local players who are still struggling to increase their market share. I don’t think local players such as Permodalan BSN and other small UTMCs are ready for the [impending] stiff competition,” he told The Edge Financial Daily. Kamarul cited branding, reputation and fund performance of local fund houses that are yet to be strengthened as reasons."

"Fund performance ...... yet has to be strengthened", to me that can only mean that some of the unit trusts have had a disappointing performance. That is of course bad for people who invested their hard earned money in them. Should fund performance not be of paramount interest, more important than the protection of certain unit trust management companies?

Anyhow, these management companies had a long time to get their act together, and would have certain advantages over their foreign counterparts. They should be much more informed about the local investment scene (where not all is what it appears to be), and should have had ample time to develop marketing channels.

Luckily it does look like the Prime Minister is serious about liberalizing this industry. What is needed is top notch managers and lots of transparency regarding (for instance) performance and sales commissions (I think commissions should never be higher than 2%, preferably even less).

Malaysia has lots of good managers (and the occasional bad one), both in Malaysia and in other countries. In know several good ones in Singapore, but one of the best known managers is Cheah Cheng Hye, about who I wrote in the past.


  1. Check out the performance of local funds on Fundsupermart - very few stand-out performers:
    Furthermore, fees are very high with 2% commissions, on top of management fees of c. 1.6-1.8% p.a., which already significantly eats into long-run average stock market returns of around 8%.

    1. Thanks for your comments. I agree, fees should not be too high, and secondly, managers should earn them by booking good results.