Islamic unit trusts resilient during crisis

by Lee Cherng Wee Barely three weeks into the new year, two unit trust funds have been launched and coincidentally both funds are Islamic-based funds. CIMB-Principal Asset Management got the ball rolling by launching it Islamic global commodities equity fund. It was followed by Public Mutual Bhd which introduced the Public Islamic Asia Leaders Equity Fund to tap the growth potential of middle to large capitalised Shariah compliant stocks within regional markets.
The resilient performance of local Shariah funds throughout the global meltdown could be the reason why bot h t he f u nds launched so far this year are Islamic-based. According to the Securities Commission (SC), the total net asset value (NAV) of Islamic-based funds have been steady around RM16 billion to RM17 billion throughout 2008 while net asset value (NAV) of its conventional counterpart fell 23.7% to RM134.41 billion. When the unit trust industry rebound in 2009, Islamic funds rode the recovery as well.
The total NAV of all local funds started rising from RM137.56 billion in March 2009 to hit RM193.2 billion in November 2009 surpassing its previous peak of RM170 billion in January 2008. During the same period, the NAV of conventional funds grew 43.7% to RM169.19 billion while Shariah funds added 25.6% to RM21.34 billion.
Putting the worst behind, fund houses are set to tap investor optimism in unit trusts with the launch of more funds this year. There were 28 funds launched last year compared to 54 funds launched in 2008 as fund houses held back on poor investor confidence. As of November 2009, there were 545 unit trust funds in the market with 400 conventional funds and 145 Shariah funds.
The unit trust industry's total NAV is equivalent to 19.6% of Bursa Malaysia's market capitalisation.
"According to fund houses, a lot of funds are being lined up and more funds will be launched this year. Investor sentiment has improved in the last six months and people are starting to put money back into unit trust," said Dennis Tan, MD of iFAST Capital Sd Bhd, a wealth management portal. Tan added that iFAST has seen pick up in sales through its webportal and financial advisors.
"We are not back to the top but it's far better than the first half of 2009," he said.
On 2010's outlook, Tan said in the first half of this year, investor confidence is there but it may be more challenging in the second half. In the next few months, iFAST will embark on a roadshow to market its portal. With investor confidence returning, Tan said it is good timing to promote its portal which offers competitive rates and research tools.

(This story appeared in The Malaysian Reserve on 20 Jan 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)