Unit Trust Funds in Malaysia

Whether it’s fixed deposit or property, there’s no dearth of investment options in Malaysia. With so many  channels available, it could get a bit difficult to choose the right investment vehicle. However, if you don’t want to constantly monitor the market and handle your investments, a unit trust fund can be your best bet.

What is a Unit Trust?

Think of a unit trust fund like a last minute potluck party. You want to throw a party, but everyone is unsure what food to bring. So, collectively everyone decides to pool in money and entrusts this amount to the party planning expert. This person now bears the responsibility of managing the money and also ensuring the food tickles everyone’s fancy.

In a nutshell, that’s how a unit trust functions. You, along with like-minded investors, pool in a certain amount of money into a fund. This fund is then invested in a portfolio that is divided into various asset classes—cash, bonds, deposits, shares, properties, and commodities. The fund manager then ensures your contributions get the best possible returns.

Unit trusts are run by either investment firms or banks. Depending on the institution you choose, your funds will be invested in local or international markets. Some also try to balance out the investment by broadening the portfolio by including more asset classes. This reduces the risk and improves your chances of getting higher returns.

This is why unit trusts have gained popularity in Malaysia, despite the rise in cost of living. One of the reasons unit trusts are so popular is because of the minimal management it requires from the investor’s end. In fact, there were 18,840,608 unit trust accounts in Malaysia in 2017, according to the Securities Commission (SC).

Now that you have a fair idea of unit trusts work, let’s check out the various companies in Malaysia that offer unit trust management.

List of Companies Providing Unit Trust Funds in Malaysia

  • Aberdeen Islamic Asset Management Sdn Bhd
  • Affin Hwang Asset Management Berhad
  • Amanah Mutual Berhad
  • Amanah Saham Nasional Berhad
  • Amanah Saham Sarawak Berhad
  • Amanahraya Investment Management Sdn Bhd
  • Amfunds Management Berhad
  • Apex Investment Services Berhad
  • Areca Capital Sdn Bhd
  • BIMB Investment Management Berhad
  • CIMB-Principal Asset Management Berhad
  • Eastspring Investments Berhad
  • Franklin Templeton Gsc Asset Management Sdn Bhd
  • Hong Leong Asset Management Bhd
  • Inter-Pacific Asset Management Sdn Bhd
  • KAF Investment Funds Berhad
  • Kedah Islamic Asset Management Berhad
  • Kenanga Investors Bhd
  • Libra Invest Berhad
  • Manulife Asset Management Services Berhad
  • Maybank Asset Management Sdn Bhd
  • MIDF Amanah Asset Management Berhad
  • Opus Asset Management Sdn Bhd
  • Pacific Mutual Fund Berhad
  • Pengurusan Kumipa Berhad
  • Permodalan Bsn Berhad
  • Pheim Unit Trusts Berhad
  • Phillip Mutual Berhad
  • PMB Investment Berhad
  • PTB Unit Trust Berhad
  • Public Mutual Berhad
  • RHB Asset Management Sdn
  • RHB Islamic International Asset Management Berhad
  • Saham Sabah Berhad
  • Saturna Sdn Bhd
  • Ta Investment Management Berhad
  • UOB Asset Management (Malaysia) Berhad

What are the Types of Unit Trust Funds in Malaysia?

Before investing in a unit trust, it’s crucial to know the different types that are available in the market and which one works in your favour. Some funds are high-risk, but have high returns, whereas some funds are low-risk, but have low returns.

It’s important to assess all your options before you settle for one type of unit trust.

Equity Funds

This is the most common type of unit trust fund. With equity funds, your money will be held either in equities or securities of listed companies. As an investor, you’ll get exposure to all the companies listed on Bursa Malaysia, an exchange holding company. This also means the performance of your units changes based on Bursa Malaysia’s performance. So, if the market is thriving so are your units and vice versa.

Under equity funds, there are sub-trusts with lower risks and lower returns or sub-trusts with higher risks and higher returns.

  • Aggressive growth funds: If you have a high-risk appetite, this fund is ideal for you. With aggressive growth funds, your money is invested in small-cap and mid-cap companies that are expected to grow over time. However, this also means fluctuation in the share price.
  • Index funds: This fund is a portfolio of stocks or bonds that are created to mirror the performance of a market index. Index funds help with asset allocation and doesn’t require constant buying and selling of stocks.
  • International equity funds: This fund invests in companies located anywhere besides your country of residence. With this fund, there is a higher potential of return. However, this depends on the type of market as well. For instance, developed countries are the least risky in comparison to underdeveloped countries.

Fixed Income Funds

This fund invests your money in government and corporate bonds in Malaysia. The purpose of this fund is to ensure you have a regular income flow unlike other funds that focus on capital growth. However, you can expect losses and gains depending on the interest rate.

Balanced Funds

Instead of investing in a single asset class, your money is divided and invested in all major asset classes. What this means is your portfolio has a combination of equities, fixed income securities, and cash to reduce the risk of higher loss.

Money Market Funds

This fund puts your money in low-risk investments, which means you get reasonable returns and there’s a high level of liquidity as well. These investments are essentially short-term deposits to banks and other financial institutions that are low-risk.

Real Estate Investment Trusts (REITS)

Through REITS, you have the chance of entering and investing in the property market. This used to be impossible for small time investors. However, REITS use your money to invest in properties, which are mostly commercial. Not only do you get a diverse portfolio but you also get much needed exposure to the property market.

Exchange Traded Funds (ETF)

Through ETF, you can buy shares and sell them throughout a trading day like stocks on a stock exchange. This is usually done through a broker. This type of fund aims to achieve the same returns like a certain market index.

Shariah Funds

Your money is put to work in Shariah-compliant investments. This fund follows the moral codes and ethics of the Islamic law. The fund doesn’t invest your money in companies involved in activities that are non-Shariah, including gambling, alcoholic beverages, non-halal food, to name a few.

How to Buy Unit Trust Funds in Malaysia

Unit trusts are easily accessible and investing in one is pretty easy. There are several ways of buying unit trusts in Malaysia. Below you’ll find how you can start investing:

Auto Debit Service

This is when you buy a unit trust through a bank. All you have to do is purchase a unit trust with a bank and then opt for the auto debit service. Every month, the decided amount will go towards your unit trust fund, ensuring consistency. However, do note that you will require an account with the bank.

Direct Purchase

When you buy a unit trust from a unit trust office or through their consultant, it’s considered a direct purchase.

Salary Deduction

Similar to auto debit service, your decided investment amount is deducted from your monthly salary.

Online

You will find online services for unit trusts as well. Some banks in Malaysia provide these services so that you can purchase your unit trusts online.

Fees and Charges

Like any other financial product, even a unit trust fund has certain fees and charges attached to it. These fees are charged for an array of reasons, whether it’s you joining a unit trust or exiting one. Below are a few you should be aware of:

Service Charge

When you first invest in a unit trust, you will be charged a service fee that’s also known as an up-front charge. The purpose of this fee is to cover all the marketing and distributing of units. It also includes monitoring of your investments by the consultant.

Annual Management Fee

This fee includes a wide range of expenses - administrative costs, audit fees, portfolio management, trustee and custody fees and other services. All these costs are cleared through your fund’s assets.

Exit Fee

You’re charged this fee when you redeem shares from your fund. If you’re exiting a fund, you have to pay a redemption fee. This fee is also referred as a repurchase charge.

Documents Required

Before you invest in a unit trust fund, you will have to submit certain documents. Now, the requirements may vary from company to company. The documents listed below are an example of what you can expect before setting up your investment:

EPF Investments

If you’re using your EPF money to invest in a unit trust, you will have to provide the following documents.

  • Account opening form
  • Transaction form
  • KWSP 9N Form
  • Copy of NRIC
  • Pre-investment form

Cash Investments

For a cash investment, you’re required to provide the following documents before setting up your unit trust account.

  • Account opening form
  • Transaction form
  • Copy of NRIC
  • Copy of birth certificate (if you’re below 21 years)
  • Payment – Cashier’s order, money order, cheque, or banker’s draft
  • Pre-investment form

In the event of death, your beneficiaries will have to submit the following documents:

  • Declaration form
  • Redemption or transfer form
  • Release letter (only applicable for EPF Investment)
  • Letter of Administration certified by Commissioner of Oath or Solicitor
  • Death certificate certified by Commissioner of Oath or Solicitor
  • Copy of beneficiaries’ NRIC certified by Commissioner of Oath or Solicitor

Returns on Unit Trusts

The returns you can expect completely depends on your fund’s performance. For instance, if your fund makes minimal profit, you may not get the returns you had in mind. To break it down even further, your investment returns take both income and capital growth into consideration.

When the value of your shares in the portfolio increases, it indicates capital growth. For example, your fund manager purchases your share for RM100. However, the manager sells this share for RM200. This results in a profit for you. This also works inversely. If your share was sold at a much lower amount than the purchased amount, you’ll experience a loss. There’s also income returns. What this means you earn dividends on your shares and capital gains as well.

FAQs

Q. Is it a good idea to invest in top-ranked unit trust funds?

A. While the fund may be ranking at the top now, you never know if the performance will be consistent in the years to come. This shouldn’t be the only criteria to invest in a fund. You can always track the fund’s performance for the last 3 to 5 years. This will help you gauge the performance and the consistency you can expect with the fund.

Q. Which unit trust company in Malaysia should I choose?

A. Before you decide on a unit trust company, do your research and understand the company’s management style. Also, look at their reputation and what people have to say about their investment style. Another factor you should consider is the fund manager’s credibility and their knowledge of the market.

Q. Are unit trust funds income taxable?

A. The dividend income you get with your fund is taxable. However, capital gains and interest income are not taxable.

Q. Besides a credible unit trust company and fund manager, what are the other factors should I consider?

A. You should always consider your investment objectives and what you expect from a unit trust fund. Also, you should check the risk profile of a unit trust and the investment time period. Finally, it’s important to keep affordability in mind. It’s good to choose fund that’s reasonable for you and matches your budget.

Q. Can I manage my own money?

A. You can manage some of your investments. However, it’s good to invest in a unit trust for a diversified portfolio. This ensures a higher rate of returns. You can consider investing in insurance, equities, fixed income securities, and unit trust.

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