'qxlrasa, \qt louol|Dtpdard aqt u stwwluor puo z2u,pmB qq &l osl 'pN tosuow lO )ossaloe zrm.ossvot uo4tnal.I.Io s!11 ssakka ot arfl mno$ &A1no a1fi ototow lo trlsra^lun 'uollot stulltpvpuo sxlutouoxa lo &ttbot aq, o, ?auluqns bdod qrrD?sar vgw o uo pasaq s! apluD st1lJ *
'suaurnlsq lueuNs ul PeuRuled nqlo ro (gs.I)) e6ueq.xa llolsrndurn'I eIEn) aqr sB q.ns lellBur {rors aqr ut pe^re.er snql ,{ouotu aql }se^ff pu" srorsa^ur
snoraumu Jo se.mosar lepu?ug eqt slood q.rq,r PunJ l?runul pepua uedo u? sr lsnJl llun vNOII]II(IOIIINI
'esle^e {su arou ela.tr
re^a^{oq sPunJ laplo eqI flsu eroE 8ur.q SulPeq e^qrB esrr rd }"q1 spunJ prr? spunJ la8rel
eqt qtl,{|'eaueluloJled luauFa^ur qI^\ uoqqeloc e^Fg8eu e sPq oqer esuedxe 'rqsuep?fiq3
punJ 3q1 rsqr pepa^ei ostP qrneser eql ,{33}u4s ploq pus ,{nq e^Pu eql uroJradtno
ol pelleJ pue se.ud dlun.as lsereroJ lou pFoc sreSEusul PunJ eql e pue se^qcefqo p4els
rctl, ot la^t ,{le^ ereqps pu pIP spunJ eqt IrcraueD soltoJl.Iod pe!$le^rp IJe^{ ermb ptaq
osp ,{eql 'eu4 re^o elqeN ara^{ s{s[ FllSuI {aql puB lue$rsuoo atmb sp^t eaueurroFad naql'oIIoJUod ra{Bru aql u?ql esroa pauroJrad aloq^ e se spunJ eq} r?ql pslF^er sSuIPu.rJ eqr
'pel?6psa^ff oslE sBrl {su .oelue$ds pu€ atuBuuoFad
lueu4se^ul uo o0"r asusdxe pu? r3^ournt olloJl.rod'e4s 'e3? sB qrns sr4suepB qtpunJ Jo pEdr[I eqt sa.ud dunras plperd 01 sreSlu"ru punJ Jo ItIIlq" pus s6 lpelqo pelels
{eqt 01 spunJ Io $uaraqpe 'erup re^o lslr .geruelsds .sPunJ eq} Jo ,qrqets eql 'uoqsrgrsraNp
Isu Jo ael83p eqr 'elllq re^o spunJ eqr Jo aru"ruroJIed Jo f.ue$Fuor e$ olul uoll€8llse^m tr?
sePnl.n oqe tI €66I requered 01t86I Irsnuel pou3d eqr rcJ ?rMqet{ ur spmJ $n! llun
euo ,{lua,{t }o eldues u Jo SupJuer pue ecu?uuoled luallNa^trr eql sep8rlsa^ur radBd sqlrJvurs{v
+ uonqc uooH 'rrr
v$ wvn Nr saNnilTSNAT TINN TO gJNYWVOiAgd JNTTSTANI TIHI
rtslrloN tI sprrt ttuUtlrD lO alnunt.d tuaqt.^ur au 1Z
22 C.pitn!Motkes Rerie||Val 3 Na 2,1995
Investors buy units from the managers ot lhe fund at the offer price and can choose to sell
them back laler to ihe managers at the bid price These prices are published dailv in our local
newspapers and are calculated daily based on the current underlving value ot the portfolio
heLd by the managers
The unique feature of a unit lrust is lhat it establishes a tripariite relationship between thre€
parties nameiy the investors (unit holders), the inveshent manager and ihe tfuslee Thir'
unique relaiionship is governed by the trust deed which spelis oul the rights' duties anc
responsibilities of each party The investors mav be individuaLs, companies or institutions
which invest funds in the irust with the hope of generating returns in the form of dividends
and/or capital gains The investn ent nanager is suallv a public conpanv which is responsible
for the daiLy investment operation lt adninisters and manages the portfolio of investments
and maintains a market for the units The ttustee is afliliated to major banks or nsurance
companies and gran$ approval for the purchase of securities and hold the purchased sec'rrrtre!-
Thc trustee monilors the fund nanagers. naintains a register of unit holders and ens res
rhat aLl ihe terms ofthe trust deed are stnclly adnereo Io'
Thc advanlages of unit trusts are : the small capital outla]' reqrlired tor investment' benefits
of risk diversificaiion, securirv of capital. access to the serlices of professional investment
nanagers. liquid and readily marketable units as thc fund nanagers are obligated to r€'
pufchase the units.
The objecrives of this study are I
1. 'to evaluate the historical pedormance (January 1984 to Decembcr 1993) of a sanrple ot
twentv one unit trusr funds in Malavsia (See Appendix 1) and to rank theif petfolmance
2. To evaluate tle degree ofisk diversilication of the lunds
3. To evaluate the consislency ofihe investnrenl performance and the stabilLtl ofthe fund('
market risks over hme
4. To dcterminc ifthe funds adhere to their srated objectives
5. To delermine ifthe lund danagers havc ihe ability to predict security pnces
6. To detcrine the impaci of lund characteristics such as age, size ol fund expense ratio
an.l portfolio iunover on investment performance and the markci risks ol the funds
LITf
Ehpi
suoDrpuo3l.+cu IIp roj p.srrErauaS aq lou plnor srrtl rr^e.roH ,{tqlrj3prsuor p:i-uBql
suoDrpuor 13)r€Lu ssetun punol ost€ s€^\ sr€a{ a^rs!o..ns iqr ur SurriuEr aruuurroJrrd
usealaq uorlpl:rror srqrlod v iruEuuoJr.d rraql pup spouad .qt lo E ruur;aq iqt rp spun!
iql,{q p;1onb sn? :ql rraadtaq patou sra uorlnl.rrotr rurrrtrun-rs € !.^3,!\oH .arr"uro]lid
r'3rll pu'r spunJ aql Jo ezr! oqt u?il\rrq uollptallo.IEre E slM rrsqr lEql punol (91.6t) reurn,)
'sro!'nurlu :qt ,lo sar.rrod tuaursi^Lrr 3q1uo trtr;rpt spuad.p srsnll lEnprNpnJo inp^ Er.q
:rqr t€ql p.lsa88ns rI s.IqEu€^ aqt iq prurEld\e iq ostr t{)uwr enl€^ cl.q rqf pqdtv s,u.su.f
uo trajjn ruErrlrub-rs ou a^rq ssntE^ rr3q aqr pu? iltprnbrt .s3Fr€q. Naua!.pupru I€nuufpuE IEDlrr
ipunl6qt Jo a:p'sreptoq rnrn lo raqunu !^rret.r rqr is8rrpt(trI
tu.Lulssrur:]o r.qon;!^n€lar .qr'lsn! lrun .qr Jo azrs .qr lEqr p.{oqs ostE qurl tntl'rur 3ql lo lEqr u'?ql r.$..q ol punoj a.rrN splni aql Jo $tsr.I rD!ur3ls,{s iqI .spunt .ql lo s.d,q snou!^ !r{t u33.s1..
esuEullojrsd ur..uarellp ou punoJ ostE puE rpou.dl]!uD snotr€r.ql IrAo spunt rquo Surtur:
3.!el!uoJr3d eql ur {iulsrsuor,{uE purJ 1ou ptno3 qrrc aruErxrorr.d.rcuqur luErqru;r:IllErrtsrlEtsJo a:rurpr^3 sE{ ersqt 1n.l .rleru rol.r.d rcurdns:ur^€q $rrr lrun ju€ lo eJUapr\.
1u€.'liu8rs iltErrrsD€ts ou sr?N Jl.ql r(3.lEr1s ptor{ prr9,{nq airpu.ql u ojr;drno or i)trt!u-
.r3^\ srrBDU€u punJ rEql p./(oqs ost! lpnts srq to stlnsar iq.L !1rrl ot S96I poua.l aqr r:\.spunJ lsnrt trun qsDirg a/ ]o aruEuroJrad cqr p pnts (//6I) qrrrl ,ulopFury p.rrun rqr ii:
'it.tErrs ptoq puR ir:a^t€! .ql LuroJredlno ot it:nou. II.a sJ.ud Ilun.as Frperd ol 3tqpun era{ spunJ iqt .iirr: :
.qt uo tEql patE.rpur sllnsr {pnts srH s!.rrd ilunras 1o irrrrqE.^n.rpa.rd s.rriEuEur ortLrtu.l
e:du!?nt€^.roJEqdtvsu.suelaqtp.lt€rarns"aua.ur:luroFad€padot.^ipaH.i96lor!.-
|i)uad rpai uet :ql roJ lpunJ I?ntnrll pu. uedo SII Jo i3upLuro]rid eq1 parpnrs (396t) ur!!:-
'a.utLuroJred arnlnl tuurrt)i :or ror:rPl luPuodorun uE sr rs r.d punJ eqt Jo rzrs lertl puE outl asuadr! aot qrra p:)rrrr!!!:sPi\\ etti!ruroJiid poo8 lPql p.aoqs edrsqS (atsrir^V lel]lsnpuI sruol /t\o(]) orrorri. jle)rP ( rqt Lurorrsd tno tor ptnor spunJ iql a?'xr^€aqruo (!.|ut adrpqs) otl"r irrl rqurr :
p.Ir^\.r 3ql uo p.s"q ,iupluroJl3dlo 3nse.ul p.lsnlp€ Isr e prdota^lp 6H r4€rs palru-1 :::u! t96L ol i!6I pouad eqr ra^o spun] Inntnru lt lo iruErruorrsd 3qt parpnls (gq6t) .L|:ri
ar ol p3le;rt(
spuapr,{rp Jo ir
sr'll ietsrur .
tz
rsa,u aqr q s.Qnrs Imrirdul
,I{SIASU SUOJYUSIIt
ortoltrod 3qr J(
Da \DPN ut sPt n! tt"4 )nto Jo 3)u"1u,l 1.,.t rDtun l
24 ('tptntl rlntk.^ R. trtr 1,, I \o. -r, /ooJ
Empiricrl Studies in Singapore and MalaJsia
KohandKoh(l98Tlanalysed19uDittrust!inSingaporeorerafivevearperiodfroml980io
1984. They found that growth funds that were expccred to yield thc highesr rerums and to
have the highesr dsk relalivc 1cl lhc olhcr typc ol itrnds do no1 have the high€si rclLrrns Dor do
they possess the highest risk. Ihjs means that ihe rclurns ard risk characleristics of these
unit trusts are noi full) consistenl whh their sralcd objecriles. Tlre tunds did or achicvc a
h'gh degree oi divenilicaLnnr and we.e unable to outpcrform rhe mark€i wilh some furds
hal,ing ncgative Adjusted Shalpe lndex (ASl). This mcans ihat rhey carncd returns rhat are
less rhan ihe avcragc risk trcc rale. Thc incone luDds outpcrlormed the balanccd aDd grolvth
funds bul noDe oi the groupings could out pedbrm th. marker. Ihe sanplc of fu.ds was no.
able to report consisteni pe brmance over time as rbe Speannan Rank Cofrelation (Rs) for
the diftereni pairs of years was nol signiticanl.
Lcc (1993) did a siudy on 21 unit trusts in Singapore over a file lrcar period fron 1986 to
1990. Her rcsuhs arc sinilar to those ol Koh and Koh (1987). She showed thal the tunds'
slslcmalic risk levels wefe quite stable over time alLhorgh rhey wcrc nol coDsislent wirh thc
lands. s!a1ed objectives.
Chua (1985) did ar empirical ltudv that covefed a LcD year period tuom 1974 to 198.1of ltM alaysian unil lrusl lunds. On I hc avcragc. thc tun ds outperformcd th e Jnarkei. Thc Rsvaluei
tor ihe Sharpe lndex and lle lieynof trdex for thc two sub periods 1914 ro 1979 and 1919
ro 1984 lvere signilicanl inclicaling fairll consisLcnt perlornancc over time. Thc uDit rrusri
appeared ro adhere kr their slaled objectives and had also peribrmcd thc; ri!k conrrol and
divclsification tasks reasonably \rell. Fund characLeristics such as size, expense rario and
pofttblio turnover werc all Degativelv corr.lated 1lr perlormance. Sjmple regrossion aralysis
showcd thar alllund chafacteristics studied were reason.tLrl) good predlcrors ofthe pertbrnancc
'neasure. Anong thc lund characlerislics studied. the average porttblio lurDover had rhe
highcsl cxplanatorl power for the pertbrmance rncasure. This mean\ rhar high perfornancc
funds tend io rclaLc to thosc $ith low crpense ratios, low asset size (net asscr value) low
porllolio turnover Hence, invesllileni managers can inprove perfbrnance by reducing crpcnscs.
managirg smallcr funds as \1cll as atoicling actile rrading which orly resulls in excessile
expense on brokerage. On average. Jensen's Alpha showed thaiihe unil rrust fundswere abte
b predict securit! prlces well enough to outperforn the nallc buy and lold sirarcgy.
Rfrt
.I
I qluoru rol ru olroJuod
lol.l?ur 3qt uo Enler Jo arEr papunoduro. fFnonlrltuo. ftqluou parEullsa eql = rE)i
= rly\
I qluou 3ql
Suunp lsnrr rrun qt! eqt Jo ujnler Jo atEl Fpunodluor ,{Fnonurruor trlqluou 3qJ- .u
(€)
\z)
(r)
( lrr + I) aSor = r'rd
'133ot - lux
,IC +'I
ssot = 'tU
l qruou.r Jo pu. .ql r" (IJr) x3pul errsooruol as.I) aqlJo I€^a'IfFr
6t6I pu" 61t
santE^sX.q
ZI JO
'86I O
I qtuolu 8ul.Inp llsn!llrn fq pred llun rad puspr^rc
(a.ud aseqmdar) 3.ird prq
sraBEuru 3r{1 ,(q psmsEeu qluoru Jo pua eql tE I lsnrl }Iun roJ anl€^ t.ss€ leu aql
aql qllr\ 1u.l
.spunJ aqt tE
ol 9861 ulor:
r.tC + ,tVN
(896I) uasuef Iq paldopE se^\ tEql poqrau pepunoduor .{Fnonlnru&-
slqt uo pasEq 3l" unlar Jo satEl eqt SuqeF.t?r roJ ^\olaq
uaoqs € puE z'I suollenba :qL
dlrteailo uorrsurHordde poo8 dra^ € sapr^ord sumlor aqr Jo uuoJ uqlIrESoI lprnlBu:qreql pu? ltErus ,{flErulsa]FrJur sr IE^ra]ur rql ar snoau?ruelsu sr lp^larur uozuoq srqJ leu:rrSurpunodrxor redord aql Jo sturel uI pass3rdxe erE surnl.r oq1 s? Suot sE rlurt Jo ql;urIrerlrqE {u" roJ sptoq (I [dV]) Iapol,,{ SuoLId rossv Flrd?J aqr l?qr pa^ oqs (696I) uasu:f
roJ (sH) uou
ql'ltor8 pu€ F
aseqt ro srrl!
01086I ruoq
EZ
urnrau Jo atBU papunoduoJ ,{tsnonuq@:l
450'IoooHIal^l HSUVSSTt
aisiojuN ut !Pu,! tetu rlun lo rrtbtuotad iu)tu{' \ur ,a
26
R,,,
Cdpital Ma*ets Reri.t vol.3 No 2,1995
DIt - Estimate of dividends received by rhe markel portfolio m in month t (obrained
from gross dividend yield records of the KLSE CI and markel capitalisalion
figures) expressed in the same scale as the lcvelofthe KLSE CI
= The monthly contiruously compounded risk free rate ofinterest for month t
= The trield lo maturity rate ofthe 90 day Treasury Blll for monih I as the prcxy for the
dskless rale of interest
Measurenenr of Risk
Two measures of risk are used for thc analysis in lbis studv. Tfie first measure ls the srandarc
deviarion ofhisrorical returns as shown in equahon 4.
(4)
\'
4N
Rri =0r+BrR, + e,' (5)
f -J".N rR,-R,)- "
,=, N1 l
Thc sccond measure of risk ls the beta coefficient (Py' of lhc unil lrust- This is the slope or
the characreristic line (equalion 5) obtained by regrcssing the monihly returns of the unlt trust
with respect 1(r the monthly rerurns ofthe market portfolio m.
Rate ofrerurn ofthejtlr uni! trust at time r
Mean ofthe rate of rerurn for thejth unit irust
Nunber of obse ations
Regression intercepl
Slope of characteristic line
Retu on uoit trust in month t
0i
(L)
(e)
(El. 0 + ))
) xls
Jo adots aql sr
G)
= ISV
'/ uo4Ent':
uI ue^'8 (tSV) xrpur adrpqs pelsnipv aqr 8u$n (186I) ar] oj puE uosqof lq p6lraxo:
s?,t\ sqr pue polrsd uorl?nte^o aql ur () q?^ralur urnlu Jo raqunu aqt Jo uorlrunJ E ::ot puno} sea sErq aql (8/6I) lrlac puP ratD{,iq pssBrq eq ol punoJ sE^r xsput adr€qs a[I
llsnll rrunlo unlarJo uorrEl^ap prepuEls = !o
umlar Jo 31Er ssallsu a:era^Y
I Nn4 trrnJo urnlar eBEra^V
fo
tE
Istd I?loJ
ru !dunruaq lsry
'9 uoDenba Ul paurJsp sr (rS) xeput 6dr€qs :qfxepul
"drsqs pa|sntpl'l puB xapul adJqs
'eqdtv quasuel paFnfpv aql pu€ ertlirs.uasuel'x3pul rou,{.jl'xapul adreqs p€rsntpv aqt alx .{pn$ srqt ur spunJ lsrul llun .qt .aruEturoFad aql SurluEr pu€ SurtEnI€^3 roJ p3sn eq ol s3ms€.u aruEuroFed rusru$a^ur >-\_t
ruauarnseatN aru€ruroJtad lneErsa.!
LZ
o = ('ra)a'r qruour q u:nler lEnplsar pouletdx.un quorss.fsx = ' ta
pautetqo) l qrua r qiuour uj ru oltotuod l3tr"ru uo urnlax = r'ud
,!s^rt"N ,t rpuk! )sn1J tlun {o r)unatotad Mu6. \rt 4
28
Tr€ynor Index
The Treynor Index (TI) is siven in equarion 8.
Risk Premiun
CaptolMatke\ Rerie\| Ul. J Na.2,1995
Ri Rr(E)
SystematrL Risk Pj
pj = Bera coefficient obtained from the slope ofthe characteristic line ofthe unit trust
Jensent Alpha and Adjust€d Jensen's Alpha
Jensen restated the original cbaracteristic line of eq arion 5 in risk premiurn form instead of
the return. Equation 9 defines the Jensent characteristic line in riskpremium form.
\,t - R1r = A; + Bj (R-.r ' Rr,J + Uj.r (e)
U:.,
Regression slope coeffrcient
Residual risk premiun for jth unil trust ai time i which is unexplained by tbe
regression, E(Uj,r) = 0.
Jensent Alpha cannot be used to rank the perfornance of differenl asseis unless it is risk
adjusted by dividing by Bi as defined in equation 10
= Jensent Alpha ofunit trustjobtained ftom the regression inrercepr
cAdjusted Jensent Alpha (A,\) =
-Bj
(r0)
i.i-f
ry'
D€gree of Risk Diversific{tion of Unit Trusts
The degree of risk diversification of a fund may be measured b"\, ihe Coefficient ol
Deternination, R'z of the regression equation 5. The closer the R2 value io 1 .0 the highcr the
degree of diversification. The Rr is theoretically the proportion of the total variance of tb€
retums of a portfolio which is explained by lhe narket portfolio.
eql Jo ecul
3ql r3q8rq
Jo luelrgl 'sesnpedord pu? semqioJq'EuerEe$Ua,\pe uI rqqnd 8m$a^m
pele3runEEor e!? pEe pmu ? luo.g pep3&e eq uBr leql unler pue lsrJ aql el€qptrt
se4palqo eseqt psnJ ! Suqreles uI ^{olloJ
ot s$od epm8 e ll?{pnb tnl,{..rots.^q eql
spunj lsn4 llsn Jo se^rpelqo pelels atLL Ie eI ecuerelol {qr tuerelJrp qlIA
.IoJ retB. l?ql seuoSelEc {su luereglp eqt ol 8upro..B pelF.sselc eq uBc spunl Nn!rpuq{ rsqf, |!on Jo
'pesn ureS€ els ZI puB II suoqpnbg .€66I ott86t pouedeqt
srs3r{ Jo rred qcB3 roJ pelllmlP. ere rpsg?$ I aql qI^{ reqFSol sluablleo3rJu?u ueuu?ads aql leEp re^o senle^ elaq Jo 3qr{usr elq?$ a^eq spuql eql p eutur3l4l
(8raf, ) s{.tu rg8waro,{Sto
seFes ?lep eqlq Z pse I slB3]{Jo sBurxiEr perBal Jo raqEnN =
Z r"e{ puB I reefJo s8ur'usl oee^qeq ecorr:gtc =
\zt)tuopee.g Io sear8ep (Z-u) qrr
(0r)
{qu sl lr sx
eqr fq Par
(6,)
eo(z - u) su
u_?u)u
Jo pseNu! [
lso.Il llUn(I1)-1=\
zp7 9
'ZI uo[Bnba dq ue 6 r4srlBN I eql
no peuBc ueql $ sX Jo acuBc$drs Jo $et eqI, alltlt Ie^o acueuuoFed Jo
;srurErelep roJ s$ar( Jo rFd qcee roJ TI uoBenbe Eusn pe]gln IRc sI (\) uopeleloC
rlBuue3ds eqt :aljpaieql €66I ot t86I poued eql roJ pqdlv uesuef palmfpv aqt pwrcu.{a{ 'xepq e&eqs paNnlpv eqt 3Er.sn dltsnuue pe)luBl e.re s$tu1 1Fn eqt .,{prqs
3E!l r lrd a'us[IoJlred,to
4sInIaN ur sVtnd M4r rtn lO Mt ir
(8)
6Z
30 CapnalMaltets Rerier val J Na.2,1995
qualitatively by Coates (1978) asThere are basically six types ol fund objectives stated
shown in Table 1 below :
Table 1 : Obi€ctives of Unit Trust Funds
Fund Obj€ctive Dennition
1. Income Funds
2. Balanced Funds
3. lncome Growth Funds
4. Growrh lncome Funds
5. Growth Funds
6. Maninum Capital Gains
Funds thar prolide as liberal a current income trom
investncnt as possible
Funds that minimise risk and at the same time
retain sone possibilitics forlong lerrn growth and
Funds thal placc slightly nore emphasis on currenl
income than on growth
Funds thal emphasise growlh more than curreDt
Funds that view incone as only a secondary or
Funds that palr low or no dlvidends and invesr ln
(rr)
0 = C h)A 6^sq ra r'h urai rorr, ^{au
oqr ar3q.s
r'!n + cld - r,uu) rg + Iv = rld - rh
uollenba Suqeuqsa eqt se iI uorrsnba 8u$n {q €I uortEnb. ur tu?tsuor orlzuou E Jo erualsrxs otqrssod 3q1 roJ ao[? a^\ suEaru srqJ ur8uo :rql qSnorql ss€d ot uorsserF.r
?urr?rurtsa atit Suruplsuor 1ou dldurrs,{q 3pEllt .q u?.,{rilrqE iuqs€.oroJ qrns roJ a.uEAo T
Isu Io laaa'slr roJ tunrlrlard Isu liJErurouj, aqt uEqt erou ur?3 IIr,{ orroJuod srq 3ruaH 0 < r.l: esq!€r llr!q.lq^\ sarlunras lrelss lllprpeujels,{s ol pual IF!\ aq r.ls€.a.roJ rofiodns E sr r.8"u"ur 3ql rl
(rr)r'la 1 Cld - fud) Ig = 1r.X - r'lu
.€I uoq?nb3 ;ursn lunnrl.ljr{su qolroJuod tariftlrl aql rsul!€p iunltuard Isu qpunJ eql Surs$r8:u tq pour"rqo aq uE--
punJ eql Jo 1g Isu .rtEurats,{s aqr Jo sol"ujrtsa .(896I) trasuaf Iq pasn poqralu aql Buraollol
sra8suBn ruauqsa^ul Jo IIUqV tuu*rarol
a^oqE z atqEl ur p.uqap asoqt qlh\ punJ aql lo ant!^ Blaq Imuorsq aqt Suuedruo:
,lq sa^qlatqo p.tels qpunJ 3qt ot oraqpE sre;Eu?ru tueurlsa^ur reqtaqa ruruuelap uEr iuo
zzIt0'l060
980
890
su'P9IErrde) lrlnurx"I Iqu\orc
euorul"qu{orc
qu{orc-euo.ul
pa.uEIPa
ants^ Erafla^lrralqo parErs Epuntr
sa^lpalqo punl lDuollparlpu€ antsa Brag uaanqaq dlqsuolElau: z aIqEI
{otaq z 3lqels8urpur] IB.rrdrua aql uo pas?q uoDrurJop e^ltEtnuEnb ysE (8r.6t) ur ua^I8 sr (r/6r) pFuocrr\r Jo
I€tusiDtDN ur sthu trhlJ tlan lo ntotulo!.d tbasatu ! ,):
32 aofr.l Uotl.r RdEw Vol I rn 2 laa5
H0 : The lnvestment perfornrance of the unit trust equals that ol the marker portfolio
Thus if ihe unii irust manager has an ability to forecast securily prices. the intercept Aj in
equation 14 will be positive (Aj > 0). This rcpresents the avcrage lncremental rate of return
on rhe portfolio per unit ol time which is due solely !o lhe managert abilily to forecasl
fut re securities prices. ln contras!. a naive buy and hold strategy can be expected to yieLd a
zero intercept (Aj = 0). in addition, lf rhe ,nanager is not doing as well as the naive bl11, and
hold stralegy. Ajwill be negative (Aj < 0).
The leasi square regression of monthly returns for each year provides the dispersion of the
sampling distribution of the intercep!. Aj. Futhefmore lhe sanpling distibution of the
estimaie. Ar is a Student t disrriburion with 0r 2) dcgrecs of lreedon1. The iesl of significance
oi the forecasting ability of iDvestment rnanagers involled the testing of ihe followine RI!E.{]
T:F
Hr : The investment perfornrancc ol ih€ unit trust is better or worse than that of the
market porttolio ie. 4 > 0 or Aj < 0 respectivcly.
Impacl of Fund Chrrucleristic on Investment Perfornance and Sysl€matic Risks
It ls ol interest to determinc \{heiher rhe various tund characteristics are as$cirted with
invcshlcnt pe.formance. Some of the frnd characieristics to be lnvestigated in this study are :
(it
0)
(iii)
In this srudy. the above independcnt variables are individually regressed agains! the
investment performance measures such as thc Adjusled Sharpc Indcx (ASI). Trcynor Indcx
(TI) and the Jensen's Alpha (o). Thrs is achieved by simple linear regression to see if any
Age of lhe funds which is neasured by thc numbcr ol)e.rrs sincc connncnccnent (X1)
Size of the funds as neasured by ihe net asset value ofthe fund (xr)
Portfolio turnover which is neasured as t|e sum of the proceeds lrom invesrment
sold and cor! ofinvesiment purchased (X3)
Expense ratio \ihich is the ratio of the managetnent expenses/tees to the ne! asset
value of the rund (X4)
spunl aqt IIe 'p.^rasqo eq uE3 sv '9I pun{ sI raurolrad lsro,{ aql sllq^\ E! pun{ sI rauuogrd
rsaq 3q1 '?qdIV s,uasu.f pelsntpv eql lo asE. €ql uI 9I pun{ sr reruroJrad ls'roa 'qt
3IIqa
tz pund sr raru.IoF.d lsaq aql xtpul rou,{a{.ql8ulsn palu€r uaqlA 6l pung $ rsturoJrad
lsro^\ aqt .Iq^\ tI punJ $ raurroJrsd tsaq 3q1 'xepq adrEqs pelsnlpv aql ot Sulpro're
paluer erE spun} aql u"qrt spunl lsn! l(un IEnpI^rpuI aql lo sllns3r aql aql s^\oqs I 6lqEf
'oltoJIod lslr?lu.qrJo leql uEql ssal q spunJ aqlJo un13r '{lqluour uE3u aql ua^g
'ononrod l.IrELu eql Jo esoql u?ql ra/$ol el? sarnsE.ui aruEluroJ.rod aql IIY ollo]trocl l3lrEur
aq1 uEql asrod{ peuroJ.rad alor{a\ e s? spunJ lsnD llun aq1 l?ql '€ .lq{ oro4 usas aq u€' lI
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sl'rnssu H:)uvss
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aqr Jo qrpe Jo .r?0.{ I?t3uEug eql Jo pua .qr te "lEp
Sursn pauroFod $ sls,{lEue uolssa€ar aql
'satqEuB^ tuapuadapul a^oq? aqr 8u$n'alq?uE^ luapued:t
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'satqEuE^ ruapuadapur eqrJo peJla paulquor aqt uodn ru3puaGp sl ernsP:':
e.u?uroJr.d lualrllsa^ut 3ql JI 3.s o1 p.uroJr"d oq" sI uolssal8ar aldqlnu Y para^otun ec
uer saIqEuE^ luapuadep aql PuE solqEuE^ luspu3dapui aql r...'{eq drqsuollElar lu?rgrLi--
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6Iti000
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= : - : f, :c : : : :
c
Qqittl Mutke^ Re\iltr V.l j No.2 199531
?
Fc
r ai ! -'
'sro]s3^ur rol lerrdP.ro trtunJas rallo
puE orroJrrod ralrEu 3ql urqt ,()isu sssl ar€ spunJ Dn4 lrun leql uorrou aqt surrlJuo. srq-l
0I uPql sset sre 1€'{r sentE^ Elaq a^"q spunl oqt IIE rsql p3^rasqo:q uEr 1I € punj sr antEl
€raq rlaNol 3qr ql punJ aql a|qa /I punl sI anIE^ 4aq tsaqSlq eql seq q qa punl aql
lEqt s/(oqs t alq"J 'ortoJlod 13lreu .ql u?qt ,{rjsu ssat ,r? spunJ Nrul tlun lErtr suEerr srql
0 t ueqt raaot sr q.rq^{ ant€^ €raq ? a^€q atoq.r E sE spunJ tsml lrun aqi lnqt sr\oqs t atqpf
sanle Erag
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Eia
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'sol]uPd:.rr:rr
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s:urr{upr aruEruroFad rElrrurs IItuE.IruBrs linpord spoqtru Surtu€r eqt IIr trqr su"au sruJ
'(S atqsJ) Ie^at !00 aql l" ru€JrlruSn arE IIE puE 6 0 spcarx: ru3rrrJJeoJ uolpt3rroJ ]u:xuErurErds oqr'sasE. a^oqP eqr Il? ul x3pul sdrEqs p"lsnfpv pu€ Eqdtv qussuaf p sntfY
uaar\laq (€) puE xspur adrEqs p3rsrip\/ pue xepul rou{alJ uaaaraq (Z) Eqdrv !.u3sL:f
palsnlpv pu? xapul roufa{ uaa.rleq (I):,{tiurEu t66I ol t86T pouad aqr r3^o spoqr:E
Suquer luar3Jrp aqt roJ palElnrlrr! araa eullrlFeol uoIrEIaIo) lu"d ueureads s:uitL::
a3u?uro}ad luaraJlrp {l1q8qs parnpord spoqlau turtu?r lusrsJJrp 3ql'pe^r.sqo aq uE.:\
'rlBr iorJ )str:rqr lrE::
sulntar raaol paulEa spunj as3q1lEqt suE3ru sql xaput rouda{ puE xapuJ adrEqs parsntrv
.^483.u a^Bq IIP 6I puP 8I !/I !9I igl 'tL spund onoluod t6tl€u aql u?qr asroa pauoti>:
ustklkw ur spukr lNn4 rrn lO afubutatad lt.wt'a\ur,r sg
,,(/sgrE 9i)
82996 0
+(rsste 9l)
[2996 0
xapul adreqs parsntpY
tr e'{dtrr' quesuot prrsfllpvxapul adlsqs paDnlpY
s' xapq ron,{arJeqdlY s.uasrar paDnlpy
t xapq roufa.\t
36 Catjtdl Ma*ex Reri.w Val.3 No.2.1995
Risk Dive(ificstion
The Coefficient ofDeterminaiion (R') of the funds as a whole as shown in Table 4 is less than
L0. This means that rhe funds are less ihan perfectly diversified. Nevertheless. the unit trust
funds in the sample are quite well diversified po folios with an overall Rr value of 0.723203
(rable 3).
Fund t has rhe highest R'?value and is thus the rnost well diversified po folio in the sample
\"hile the least diversified portfollo is Fund 16.
Results when Funds are Grouped According to their Obj€ctives
If the funds are grouped according to their objectives as shown in Table 6, the average rnean
monthly return of tbe balanced, growth and income funds are 1.0063%, 0.28'/ /% ^r'd
0.2678% respectively. Among then,the inconefundspost the worst resulls while the balanced
funds are the best Pertormers.
When performance is risk adjusted using ihe Adjusted Sharpe Index, Treynor Index and the
Adjusred Jensen\ Alpha, all ihe three neasures produce similar results with the balanced
funds being the best performers and the growth funds being the worsl performers.
Tbebeta lalueshowsthat the balanced tunds have the lowesl risk while inconefundshave the
highest risk. Tbis contradicts the fact lhat lncome funds should have the lowest risk as they
invest mainly in government securities and bonds while growth funds have the highest tsk as
they invest in risky stocks which have high capital gains potential. The balanced funds have a
beta value (0.698132) which is close to the vahc of 0-68 listed in Table 2 indicating thar
balanced funds scen to adhere 1o lheir stated objectives. The growth and incone funds
have values that are different from the values in Table 2 implying that they do not adhere
very well ro their objeciives.
The R'? value shows thar the balanced funds are rhe nost well diversiiied whereas growth
funds are the least diversified.
Consislency ofPe omrnce of Funds
Table 7 shows that when periormance is ranked by the Adjusted Sharpc lndex, the Spearman
Rank Corelation Coefficient (Rs) for the perlods 1987 & 1988 and 1988 & 1989 are positive
a^rtrsod
qu{of !
l?qt 3ur:
LI
tlzazL 0
uEql ss.l
nttt|trfu ut spunr $nqtlrnlO a.uDtula!,a tlortsa 1ut ?.
q!ii t{
EP9
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=
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38 ColnolUnrke6 Rerier r,l I N, .? /o.5
and sjgnificant al the 0.05 level. This neans that funds that perfon'nd well in the filsl year
also perforned well in tbe second year ie. the funds are ranked similarly in both years
However for lhe period 1989 & 1 990. the Rs value was significantiy negative. This means
that the funds' performancc rankings bave reversed.
Sinilar results were obtain€d using rbe Treynor Index and the Adjusled Jensens Alpha. as
shown in Table 8 & 9. This provides conclusive evidence that tbr ihe period 1987 to 1989.
funds that performed well or poorly in one year repeatcd their peiformance in later years.
Howcver the irend was relerscd for the period 1989 & i990.
Slability of Systematic Risks (Beta)
Table 10 shows the Rs values of the funds systematic risks. It shows rhat for the periods 1987
& 1988. 1988 & 1989, 1990 & 1991 and 1992 & 1993. the Rs values are significantly
posiiive. This mears thal the funds'beta values that are high in the tirsl ycar are also high in
rhe follo$ing years. This tneans ihat the relalive ranking of the risks does not change
considerably and is q ite siable.
Forecssfing Ability of Investment Managen
As can be seen from Tablc IL, all the Jensen's Alphas are negarive This neans thatnone ofthe
investment managers has forecasting ability of security prices and rhat t|ey did not perforn1
beuer than tbe naive buy and hold stralegy (market portfolio) which has a value of0 0
It can be observed tbal Funds 14, 15. 16, 17. 18. 19 and 20 have significanily negative Jensent
Alpha. This leads to the acceplance of llre Hr hypothesis that the inveshcnt ma.agers have
poor forecaning ability
As far as this sample of unit trust funds is conce.ned. the resuli seems to djspel lhe nolion thal
ni1 trust managers have superior forecasting ability.
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t606t 0
919900
xapol tdrsqs parsntpv aqt Sqsn spmd aqr B
roJ s;uHu8u ar@uroJrad Jo uolslarroJ )toEu : / aIq€I
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40 Co?nal Matk.rs Reriet V.n. 3 Na.2,1995
Table 9 : Rank Correlalion of Performance Rankings forall lhe Funds using the Adjusled Jensen's Alpha
tu
Nole : * Significant at 0.05 level
Table l0; Rank Correlation of Syst€maiic Risks (Bela)for aU th€ Funds
Note: * Signiiicant at 0.05level
Period Sp€lrman RankCon€lslion Coefiicient
T Value
1984 & 198s
1985 & 1986
1986 & 1987
1987 & 1988
1988 & 1989
1989 & 1990
1990 & 1991
1991 & 1992
1992 & 1993
0.05,114
0.62',72',7
0.120'78
a.62208
0.51129
-0.49351
-0.35065
-0.02727
0.28701
0.23001
3.51081 +
2.42184
3.46326 '2.613E9 +
2.4',7331+
-7.63201
-0.11892
1.30601
Pe o't Speaman RsnkCorrelation Coeffcient
T Value
1984 & 1985
r98s & 1986
1986 & 1987
1987 & 1988
1988 & 1989
1989 & 1990
1990 & 1991
l99l & 1992
1992 & 1993
0-,12556
0.33r t7
0.30779
0.61299
0.56494
-0.02078
0.,15325
0.25065
0.4597,1
t.9952
1.52986
] 41009
3.381112 *
2.98435 *
-0.09059
2.21639 4
1.12858
2.25658 +
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Igtt98I-t9z9L9 L
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406810 0
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t6t0I0 0-
21.8600 0-
292600 0
t6r900 0-
6lES00 0
tII900 0'
Il ts00 0-
861t00 0'
961.t00 0-
r69t00 0
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a capitaLMa&.1\ Reie|| vol 3 No.2,1995
Inpact ofFund Charactc.istics on Investnent Performance and Systenatic Risks
When sinple and m ltiple linear rcgressions were performed the follosing signiticant
relationships shown in Table 12 arc obtarned
Table 12: Significsnt Regressiotr Equations
Note : * Significanl at the 0 05 level
As can be seen in equalion I in Table 12, the JeDsen's Alpha is negativelv related lo the
expense ratio. However, lhe relationslrip is weak with a R2 value of 0 27323 Hence a high
expense ratio tends to result in lower retums This is duc to the fact that high expenscs spent
on investnent aDalysis erode the returns that unft holders can earn'
I l '\
Equarion 2 in Table i2 suggests that the riskrness ot the
age of the funds although the relationslrip is we'k with
that lhe older funds are Less risky and more conservatrve
the newer funds are more aggressive and invesl in nore
result in higher retu s.
lunds are negaiivell, related to ihe
a Rr value of 0.19805. This means
in iheir fund management whereas
risky stocks $hich however did noi
Equation 3 in fable 12 suggesls that the riskiness of the funds are positivel)i related to the
size ofthe funds wirh a R'?value of 0 52098 indicaiing a fairll' sirong relationship Tlisequatior
implies lhat the largef funds ha\re highcr risks and vrce versa
Equation4 in Table 12 shows thaithe riskiness of the funds is positilcl) relatcd to the portfolio
turnover wilh a R'? value ot 0 54847 which indicatcs a fairllr strong relatiolrship This means
Equalion RZ F Yalu€
I
2
3
1.2,13325 Xr + 0.003148
-0.018606 X1 + 0.936996
7.408317 x 10 e x, + 0.546612
5.02305? x l0'xr +0.557829
o.2:7323
0.1980s
0.52098
0.54E17
10.52642 +
6.9149 *
30.45295 +
3,1.01151*
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.aulrt rJ{o.tqpls 4rnb rrp ssnlpr Eteq .qr sE Isu.rletxslsis ,lpur.q] rcJ prps aq u'?3 euj€s aq.L aru?uDo]lid rr.ql ur tu.lsrsuo..lrnb arp spunJ.ql tEql sdoL:srqJ 3u[t .ql ro %0s ]uslsrsuor sr SurIUEr s.rrruroJrld spuq.ql lpouad rp3,{ ui1.qt ro:
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su"cur srql !_(
q8rq E .ru.H
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Capittl Markets Reriew Vol. a No 2,1995
The study suggests that invesiment managers can improve their performance by reducrng
iheir expenses on securiiies analysis so that investors can enjoy better relurns h also shows
that rhe Larger funds and tbose that are involred in active trading are more riskv while rhc
older funds are less riskl Hence investors can use such variables as age' size and tradirg
practices in seleciing and investing in the funds thar suit thcir degrec of risk aversron
The major inplications raised by the research are that (1) unil trust f nds shouLd strive to
keep costs down in the lighl of the managers' inabilitv to benefit ftom rcsearch aciivities'
(2) investors should be wary of managels' claims of superior pertbrmance as nanv of their
claims are over optinistic and not based on salisfactorv mcasures. and (3) unii trust managers
should possibly spend nore lime on detining objectives with regard to risk and return'
explicitly srating their fundt objectivcs to the public and formulating porlfolios to nalch
atduEs aqt q spunrl rsnrl rlun Jo rs!.I: I xlpuadd\'i
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APPENDIX2
LIST OF UNIT TRUST FUNDS IN MALAYSIA
Capitol Markas Reriew vol 3 Na. 2,1995
\I
III
Funds managed by Anb-Malaysia Unit Trust Bhd
1. Arab Malaysian Gilis
2. Arab-Malaysian First Fund
3. The Malaysia GroMh Fund
4. Tabung Ittikal Arab-Malaysian
Funds managed by Arsb-Malaysian Property Trust Bhd
1. Arab-Malaysian First Properly Trust
Funds managed by Asia Unit ftust Bhd
1. Malaysian Investnent Fund
2. Malaysia Progress Fund
3. Tabung Ananah Bakti (Malaysia Security Fund)
4. Malaysia Be4aya Fund
5. Malaysia Equity Fund
6. Malaysia Commerce Fund
Funds managed by Palaburan Horta Tsn8h Nasional Bhd
1. Amanah Hana Tanah PNB
Fnnds mansged bt Amanrh Saham Bumiputra Bhd
1. Amanah Saham Bumiputra
Funds rnanaged by Ananah tuhsm Nssional Bhd
1. Ananah Saham Nasional
Funds msnaged by Amanah Saham Mar. Bhd
1. Kumpulan Modal Bumiputra yang Pertama
2. Krmpulan Modal Burniputra yang Kedua
3. Kumpulan Modal Burniputra yang Ketiga
Dste of launching
213n77a6
2311/88
28t1189
78t72t92
Date of lauching
2U2t66
!6t10
t1t5t17
st5n6
2u!82
2411181
Date oflaunching
January 1991
Date of launching
1981
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"rnuad u"rnqEl3d Elndlurng u?lndun)
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qnFdase)l 8uE{ EIndIUng l€pohl u"Fdlun)
uetquaset 8us,{ El1ndrlng IEpoI{ uElndun)
uEd€la)I 8uP.{ E'ndiung lepol^l uElndrun)I
(uBr{Equleued) qnlnle) Bu"f erndIlIIng l"pot'{ uqndun)
(ueqarorad) qninta) 3uE{ "rlndruns IEpoI uetndtun)
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Capital Ma*ets Reiew vol 3 No 2, 1995
48
x)(In
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xv
XIv Funds msnaged by Amanth Sth|m K€dah Bhd
1. Tabung Amanah Saham Kedah
Funds mamg€d bv BBMB Unir ltust Managenenl Bhd
1. BBMB Unit Trust Fund
2. BBMB Prime Fund
trunds manag€il by BHLB Pacilic Trust Manogem€nt Bhd
1. BHLB Pacific Double Growth Fund
2. BHLB Pacific Emerging Cornpanies Growth Fund
Funds mamg€d by BIMB Unit Trust M rsg€m€nt Bhd
1. Amanah Saham Baflk lslam Filst Fund
xv
XVIII Funds monsgetl by Comnerce Property Trust Managen Bhd
1. First Malaysia ProPerty Trust
xvI
xv
Dat€ o{ launching
212194
14l5l9r
Dat€ oflsunching
1515191
7015194
Date of launching
79n/94
Dst€ of lnunching
1519192
Date of launching
2913181
1llr2l84
213192
24177193
2514194
2514194
Dste of launching
2613192
19t9194
Dal€ of launching
August 1990
xIx funds manag€d by DCM'RIiB Unit Ttu3t Manag€ment Bhd
1. DCM-RHB Dynamic Fund
Funds msnaged by K ala LumPur MulMl F|rnd Bhd
1. Kuala Lumpur Savings Fund
2. Kuata LumPur Growth Fund
3. Kuala Lumpur lndex Fund
4. Kuala LumPur lndusiry Fund
5. Kuala Lumpur Aggressive Growth Fund
6. Kuala Lumpur Regular SaYings Fund
Funds managed bv Mavban Manag€ment Fund Bhd
1. Mayban Unit Trust Fund
2. Maybar Balanced Trust Fund
XXII Funds manag€d bv Mayban koperty Tnst Fund Bhd
1. Mavban Property Trust Fund One (unlisted)
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LLILIZI
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50 Crpital \lar\er Rt\ie{ ral.I N. 2 toa\
lvliller, R.E. and Gehr A.K. (1978).'Sanple Size Bias and Sharpe's Performance
Measure :A Notc." "roendl of Financial and Q ntutdrtrs Aralrra, l3(5) (December).
Sharpe Willian F (1966). 'Mulual Fund Perfornance." Jotinat of Business,39
(January). i19 138.
REFERENCE
l. Chua, Chin Pen (1985). "The lnvestnent Performance ol Unir Trusts in Malaysia..
Unpublished MBA Disseftar,or. Univenity otMalaya, Kuala Lumpur.
TH..v.{501
6.
11.
t2.
3.
5.
Coates. C. Roben (1978). Iwestment Sttate,New York : McGraw Hill.
F;th. Michael A. (1977), "The Invesirnenl Performance of Unit Trusis in rhe Period
1965-7s," .toumal of Monet, Credit. a d Ba kins,9.s97 6A4.
Gurney, J.P (1976), 'Rank Corrclation of Unit Trusr Performance 19'71 19j5."The Inwstment Anohst.
Jensen. Michael C. (1968), 'The Performance of Muiual Funds in rhe period 1945'1961." Joulnat of Frri,w,23(2) (May), 389 ,116.
Jensen. Michael C. (1969), "Risk, the Pricing of Capjtal Asscls, and the Evatualion ofInlestment Po folios," Jo urnal of Busines, A ( Apr|]). L61 241.
Jobson. J.D. and Korkie B.M. (1981). "Performance Hyporhesis Testing wilh the
Sharye and Treynor Measutcs," .Iounotof Financ?,36(a) (Se|tember).
t. I\:. i- :,
lJ. Koh. Francis and Koh. Seng Kee (1987), "An Enrpirical Analysis of the perfornancc
ofUnitTrusrsinSinsapote,'Se&liti^In.Iusrr)rR€fle'y,13(2)(Ocrober).113.
Lee, Marina E"l. (1993), 'A Performance Analvsis of Unir Trusts in Singapore,.'
Securities Industr}" Review. 19(1) (April),29 36
McDonald. John G. (1974), "Objectives and Pefformance ot Mutual F[ltds..' toumdlof Financi anl Qudntitortye ,l,arysts. 9(3) (June), 3I I 333.
10.