In response to the Utusan Malaysia articles dated 6 and 7 August 2006 in respect of EPF members suffering losses in unit trust investments
8th AUG 2006
We are extremely concerned by the recent report in a Malay daily newspaper stating that 80% of the EPF members who withdrew from their EPF savings to invest in unit trusts had suffered losses totaling RM600 million. A quick survey among some of our members indicates that while there are some investors losing monies but the percentage quoted of 80% remains unsubstantiated. Based on the fund performance report as at 28 July 2006 from Standard and Poor’s, an international research fund house, the average returns from Malaysian equity funds for 7 years is 24%, 5 years is 56% and 3 years is 26%. The hallmark of unit trusts is its mid to long term investment strategies for investors and the above figures from Standard and Poor’s indicate unit trust investments do deliver respectable returns.
From the newspaper’s reported losses of RM600 million as opposed to the respectable returns as mentioned above, we are perplexed as to how the former figures were arrived at. We are unsure at this moment the basis used in arriving at these figures. The difference of RM600 million as quoted might not have taken into consideration other factors which may have an impact in calculating returns such as members redemptions upon realization of profits, switching-in with profits into other funds, conversion to ordinary accounts after reaching age of retirement, death and other incapacitation.
Moving forward, we will schedule for an industry dialogue with EPF to address the above mentioned conflicting end results and try to arrive at a consensus in measuring the actual performance of the contributors’ investments. We believe more time is needed to resolve the pertinent issues for the benefit of the EPF contributors / industry and not make any hasty decisions.
As FMUTM and / or our members have yet to receive any directives from the EPF, the present procedures relating to investments under the EPF’s Members Investment Scheme remains unchanged
Compared to other form of investments, unit trust investments are well regulated. Before a sale is concluded, the unit trust consultant is required to give a prospectus to the prospective investor and explain to the latter the risks and benefits of investing in unit trusts, the fund investment objective, and charges to be incurred etc. A needs analysis of the prospective investor is also done.
Furthermore, fund managers are appointed after a thorough selection process to determine their competency and proficiency in the industry and such appointments are vetted and approved by the regulators. Accordingly, the fund managers investment philosophy is determined by the fund objectives and they have to achieve these goals within the parameters set. The question of fund managers’ inability to manage the funds on a viable basis is thus unfounded. As you all know, the equity market was rather flat last year and coupled with investors’ instinct to try to time their investments, it has not helped to boost investors’ returns.
To maximize returns, investors are advised to practise dollar cost averaging in a consistent manner over the long term and be savvy in recognizing when to buy into suitable funds and perform switching when necessary in response to market conditions and personal circumstances.
Diligent investment planning and regular consultation with qualified unit trust consultants are important to keep investors from assuming risks beyond their tolerance such as chasing short term performance. Investors should resist buying or selling investments unless they are part of their long term plan. In this regard, FMUTM has always stressed the importance of investors’ education and their understanding that unit trust is for the medium to long term and not for quick gains. Like other form of investments, unit trust does carry a certain amount of risks.
From the desk of the president:
YM Tunku Dato’ Ya’acob Tunku Abdullah
President of Federation of Malaysian Unit Trust Managers
Issued on behalf of the Federation of Malaysian Unit Trust Managers. Members of the Press requiring assistance may contact Mr. Lee Siew Hoong, Executive Director, at tel no: +(60)3 – 2093 2600 or fax no: +(60)3 – 2093 2700 or e-mail: firstname.lastname@example.org