Monday, 28 August 2017

PNB reveals secret of how it makes money to pay high dividends (3)

I wrote before about this subject: here and here.

A lot of articles recently about PNB and the new group chairman Tan Sri Abdul Wahid Omar, both in The Edge and in The Star.

Unfortunately, again what I called "the most important number" is missing, this is what I wrote before:

Lots of numbers are mentioned, but the most important number (per managed fund) is missing:
"The increase/decrease in the Net Asset Value (marked to market) per unit over 2016"

This is a pretty basic number, essential to measure the long term performance in the long run.

Once we know this number we can compare it to other funds, or to the total (that is taking into account dividends received) returns on Bursa.

A simple question: was this number positive over 2016? And how does it compare to the price investors pay per unit?

Disappointing that this all important number is not given, and that the journalists present didn't ask for it.

From The Edge:

This is not a Ponzi Scheme. As I said, in good times, we create reserves and we don’t distribute all the gains in any particular year. So, we will have those reserves to buffer the payment of dividends during the tough years,” said Wahid.

The point was raised as questions over whether the high dividend at PNB-managed Amanah Saham Bumiputera are real and sustainable have been bandied for some time.

It should be noted that even when the local bellwether FBM KLCI fell 39% year on year in 2008 — and the dividend payout by the Employees Provident Fund (EPF) dropped to 4.5% — ASB’s dividend remained at an envied 7%. Yup, that is 378 basis points above the so-called risk-free-rate or 10-year Malaysian Government Securities of 3.22%.

Well aware of the scepticism, Wahid offered simple logic instead of going on the defensive. “It is a very simple model in the sense that during good times, you don’t pay all the returns. So, we keep some reserves. And during tough times like the past three years, we’ve been realising returns from the unrealised gains. No magic. It’s a very basic model,” he explained.

The yearly distributed returns are known, why not make the realized returns (marked to market, after expenses) public? We can then compare them to each other to check if they match, if there are any long term trends and to compare them to returns from similar Malaysian unit trust schemes.


  1. Maybe their profit and reserves come from market making.The reason they r not revealing is because its a hyper lucrative business??

  2. Could be, but I dont think so, need some conclusive evidence. Normally when funds are larger than 10% of the market (which is the case for PNB), they basically are the market, so returns should be similar minus a small fee for expenses.