Monday, 20 May 2013

How Did Unit Trust Funds Perform Pre and Post Election?

In my previous article dated 28th April 2013, I wrote about the possible outcome of the 13th General Election. Out of the 5 scenarios of possible outcome of the election, Scenario 2 : BN Wins with a Slim Majority and Forms the Federal Government was the outcome to be. When the Bursa Malaysia opens its trading doors the following Monday after the election, it shot up to a historical high of 1750 points. The index has been going up since 6th of May 2013 with occasional minor corrections due to profit taking as seen in the 1 month KLCI chart as shown below:

The positive sentiment among investors both local and foreign have kept the index above the 1700 points region for the past 2 weeks. For stock investors, some are still pounding their head against the wall for selling their holdings before the election while some are laughing their heads off after making a killing for holding their stocks.

I'm not the kind to predict the timing for entry or exit of the stock market, but what intrigues me most is how Equity Malaysia unit trust funds have performed for the last 3 months (pre and post election). Were the fund managers able to predict the timing of entry and exit? Or perhaps the fundamental philosophy of some fund managers to hold on to good quality stocks were greatly rewarded by the gains made after GE13?

In another post I wrote before the election, Election 2013! How Are Malaysia Equity Funds Reacting To It?, popular funds such as syariah compliant Eastspring Dana Al-Ilham and Hwang AIIMAN Growth Fund as well as conventional Kenanga Growth Fund were holding cash of about 13% - 26% of their entire fund size in preparation of buying opportunities. Did they make the most out of it?

Let's take a look at how these funds have performed post GE as shown in the table below: 

Fund Name
Past 3 Months
Performance (% Gain)
5 Years Annualized
Returns (%)
Kenanga Growth Fund
AMB Dividend Trust Fund
Areca Equity Trust Fund
Kenanga Syariah Growth Fund
OSK-UOB Malaysia Dividend Fund
Hwang AIIMAN Growth Fund
Eastspring Dana Al-Ilham

Comparing the above performance with the Kuala Lumpur Composite Index performance between 17th Feb 2013 - 17 May 2013 which gained about +9.14%, I would say most of these fund houses have outperformed the Bursa Index gain. 

It is suffice to say that most of the fund managers from the table above have managed to make excellent decisions in selling, buying or holding their stocks. Pure stocks investors would have dispute and challenge the performance of the fund houses claiming that they would have done better by buying their own stocks. I agree to that point to a certain extent, yet how many of us are able to claim the same especially when the prediction that the market will suffer post-election is so strong thanks to the calls for UBAH and possible change over of government?

That aside, how about we take a look at the performance of Funds which are invested in Small-Medium Cap Equities:

Fund Name
Past 3 Months
Performance (% Gain)
5 Years Annualized
Returns (%)
Eastspring Investments Small-Cap Fund
OSK-UOB Emerging Opportunity Unit Trust
OSK-UOB Small Cap Opportunity Unit Trust
AMB SmallCap Trust Fund

A whopping +25.45% gain in 3 months is an impressive figure by any standards! Yet for long term Unit Trust Investor this is just a small success and there is nothing to shout about. Looking at the long run, the 5 years annualized returns of 12.58% is still pale in comparison to the Equity Funds which return about 14-16%. (compounding an additional 2-3% really makes a whole lot of difference to your investment)

In a nutshell, most investors both in unit trust or stocks would have benefited from the current market uptrend. I would however caution investors whom try to time their entry to watch the market come September 2013 as the Countries Budget for 2014 is announced. With our country already in huge debt and facing massive pressure from international rating agency to introduced GST, I doubt there would be much goodies for us Malaysians come Budget 2014. Meanwhile enjoy your profit taking while you still can!

Cheers and Happy Investing!

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