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?