Rant about Amanah Saham 1Malaysia, again

One month ago, I published a post regarding the dividend of Amanah Saham 1Malaysia. I explained that the return of Amanah Saham 1Malaysia is not 3.7% - 4% as everyone and every single articles in all newspapers claimed. Indeed, Amanah Saham 1Malaysia is benchmarked to 5-year MGS yield which is around 3.7% to 4%. But what does that mean anyway?

The purpose of benchmarking the fund is so that PNB as the fund manager has a yardstick to measure its performance upon. Normally, a fund manager's objective is to to beat the benchmark and realize a return higher than the benchmark. 3.7% - 4% is the return for 5-year Malaysian Government Securities (MGS), it is not the return for Amanah Saham 1Malaysia.

There was another article about this silly mistake on TheStar Online. I quote:

"UOB KayHian research head Vincent Khoo said 10 billion units was a difficult target to meet given the low return for such an equity income fund.

As stated in AS 1Malaysia’s prospectus, it is noted that the fund’s returns will be benchmarked against the five-year Malaysian Government Securities (MGS). The current yield of five-year MGS is about 3.7%.

Khoo said the return was slightly higher than bank interest rates but it was not as attractive as previous Amanah Saham funds."

Again, Amanah Saham 1Malaysia's lacklustre response is attributed to the fund's low return. Fact is, this occurs because the experts and professional have been trumpeting the "low return" in all major publications. Our fellow citizens buy it and hence the low subscriptions. Nevertheless, my friend thought of another brilliant factor - our countrymen dislike the man who launched Amanah Saham 1Malaysia and thus refuse to invest in the fund. To that, I have no comment. ;)

If we have done a little more research, we would have known that Amanah Saham Malaysia (ASM) and Amanah Saham Wawasan 2020 (ASW 2020) (which consistently return an average of 6%-7%) are benchmarked to 3-month Kuala Lumpur Interbank Offered Rates (3- month KLIBOR). Guess what, KLIBOR has been hovering between 2.5% to 4% for the past few years.

Another thing that intrigued me is all these fixed-price funds by PNB (AS 1Malaysia, ASM and ASW) have up to 90% of their total portfolio invested in local equities. They are mainly equities funds. Why are they benchmarked to MGS and KLIBOR, instead of KLCI? Continue reading...

Amanah Saham 1Malaysia - Dividend NOT 3.7%-4%

In the past few days, several middle-aged women have approached and told me that they are not going to invest in the newly launched Amanah Saham 1Malaysia because its return is only about 3.7% to 4%, much lower than the usual 6%-7% return consistently achieved by Amanah Saham Malaysia (ASM) and Amanah Saham Wawasan 2020 (ASW 2020).

I was dumbfounded. How did they know about its return when 70%-90% of the fund's total portfolio is going to be invested in equities and the rest in fixed incomes? Amanah Saham 1Malaysia, like the ASM and ASW 2020, is mainly an equity fund. And equities, as we know, had gone through a roller coaster ride in the past one year. Shanghai Composite Index, for example, after reaching a high of nearly 6000 at the end of 2007, had plunged to low of 1700 before staging a tremendous recovery to 3400 lately.

To find the answer, I checked the website of Amanah Saham Nasional Berhad and downloaded the prospectus for Amanah Saham 1Malaysia.

From page 12 of the prospectus:

5.3 PERFORMANCE BENCHMARK

The performance of the Fund is benchmarked against the performance of other instruments that have similar features with that of the Fund. Being a fixed price fund, the return to unitholders of the Fund will mainly be in the form of the Fund’s income distribution yield. The return will be benchmarked against the average of 5-year MGS yield which can be obtained at Bank Negara Malaysia’s (BNM) website and Bloomberg.

Well, the current average of 5-year Malaysia Government Securities (MGS) yield is about 3.7% - 4%. They must have misinterpreted what they read in the newspaper, I thought. So I spent some time explaining to them, that Amanah Saham 1Malaysia is benchmarked to 5-year MGS yield which is around 3.7% to 4%, and that is not the return of Amanah Saham 1Malaysia. We will not know the return of Amanah Saham 1Malaysia, as it is largely depended on the performance of its portfolios.

Then, this morning I read the following excerpt from Nanyang Siang Pau:

理财界人士指出，一个大马基金的年利率介于3.7%至4%之间，不比之前推介的利息至少6%高，因此都掀不起太大购兴。

I nearly fell from my chair.

Clearly, the public has been misguided. I can understand when the typical person can't fully apprehend the prospectus as they don't study finance, but the people who say this are professionals, they are the experts. What are they doing?!

From the master prospectus that I downloaded:

ASB, ASW 2020, ASM and ASD
Being fixed-price Funds, the performance of these Funds are expressed in terms of the respective Fund’s Annual Income Distribution Yield, benchmarked against the 3-month Kuala Lumpur Interbank Offered Rates (3- month KLIBOR), which is obtainable at any commercial bank.

You can obtain the 3-month KLIBOR here.

Do I need to say more?
Continue reading...