PETALING JAYA: The unit trust industry is expected to continue its growth momentum into the second half of this year, albeit at a slower rate, due to global economic uncertainties arising from the unfavourable US economic outlook and sovereign debt crisis in Europe.
Fund managers, nevertheless, said they expected a strong single-digit growth supported by demand in less riskier funds like fixed income, dividend and money market funds.
According to data from the Federation of Investment Managers Malaysia (FIMM), the private fund industry in terms of assets under management grew by RM48.4bil or 95% from 2006 to 2010 despite the 2008 global financial crisis.
Ng: ‘We expect risk appetite to remain low.’The asset size of the unit trust industry had been on an upward growth trend since 2004. Between end-2004 and end-2007, growth had been at 12%, 23% and 39% per annum respectively.
In 2008, asset size declined by 22% due to the global crisis and rebounded by 47% by end-2009 and this growth continued into 2010 with a growth rate of 18%.
HwangDBS Investment Management Bhd chief investment officer David Ng told StarBiz that given the softer unit trust industry outlook this year, he expected growth would likely moderate but could still safely achieve a high single-digit growth.
He said the company's unit trust fund assets grew 26% year-on-year, adding that this year's unit trust assets had largely been driven by its income and dividend-type products due to its relative stability and evergreen nature.
“It is likely that aggressive-type equity funds will take the brunt of the softer outlook, but less volatile income-generating assets such as good quality fixed income and dividend-type funds should see more inflow as money will eventually need to find a home'.
“Due to the uncertain outlook, we expect risk appetite to remain low. As such, high quality dividend yielding funds and fixed income funds will continue to be in demand,” he noted.
Such funds, Ng said, would tend to outperform in such market conditions due to its general defensive and less volatile nature and tend to be more popular among investors.
Pacific Mutual Fund Bhd acting CEO Gary Gan said although investor sentiment had clearly shifted towards the less risky funds, like income-type and money market, nonetheless there have not been mass panic or mass redemptions from retail investors.
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This, he added, was a good sign as it could be viewed as merely a re-balancing of portfolios as investors re-assess the outlook and re-allocate accordingly.
This, he added, was a good sign as it could be viewed as merely a re-balancing of portfolios as investors re-assess the outlook and re-allocate accordingly.
From the product perspective, he said that industry-wise there had been 37 new funds launched in the first half of the year and eight new funds were launched in the second half, up till Aug 11, this year.
So in terms of product launches, Gan noted there was still a healthy growth, adding that 71 new funds were introduced last year.
For 2011, he said there was a strong inflow into Malaysian and Asean-centric equity funds and believe this trend would continue as these markets appear to have the best investor confidence and prospects going forward.
Meanwhile, Areca Capital CEO Danny Wong felt long-term investors should park more money in equity funds to take advantage of the recent price correction for mid-term opportunity, but also have other liquid assets for contingency requirement.
He anticipates a stronger equity market performance after the dust has settled from the economic uncertainties as emerging market, especially Asia, would continue its strong growth and attract more returns-seeking funds.
“Bursa Malaysia would benefit from the spillover effect along with the implementation of some of the Economic Transformation Programme (ETP) projects. The possible forthcoming general election coupled with corporate earnings would continue to drive stock prices to new heights,'' Wong said.
On the challenges facing the industry, Ng said it was usually compared to investing in the stock market and as such there was a need to change the short-term mindset and short-term price tracking.
Over the long term, he said education on the basics of financial planning was important for the growth of the unit trust industry. Wong said competition from substitute products and less-regulated products and activities such as land banking, commodities trading, illegal high-yield deposit taking activities could impact the industry by pinching money from investors.
Land banking is a scheme to buy undeveloped land for subsales later after a conversion for use of other purpose or extraction of raw materials.
Shortage of talent was another issue that the industry needed to resolve to bring the industry to a higher level, he said.
Gan said two key areas needed to be looked at.
Firstly, the challenge to continue to perform amidst a highly volatile investing environment with more new entrants and other alternative products, and secondly, to enable more local fund managers to gain experience and recognition investing offshore, especially for Islamic funds, he added.
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