Thursday, 30 June 2016

Top 10 Malaysia Shariah (Islamic) Unit Trust Funds Comparison!

I have been receiving quite a number of requests lately asking for the best Shariah compliant unit trust fund to invest into. In light of these requests, I've decided instead to come up with a blog post which will provide a comprehensive comparison between the best Shariah Compliant unit trust funds.

With hundreds of Shariah Compliant Unit Trust funds available for Malaysians investors, it is not possible to compare all of them. Therefore, I will only choose the 10 best Shariah funds for comparison according to the following criteria:

  • Invest into Shariah Compliant Malaysia Equities/Stocks
  • Rated 4 or 5 STAR by Morningstar
  • Top performing in terms of returns
  • Funds come from various fund management company

The 10 Selected Shariah Compliant Funds
Here are the 10 selected Shariah compliant funds and respective fund management company: 
Top 10 Shariah Unit Trust Funds (Fund Management Company)

The 10 funds according to their Morningstar category:
Top 10 Shariah Unit Trust Funds (Fund Category)

(%) Annualized Return Comparison
Comparing the (%) annualized returns of each funds is what most investors would normally do. This method is the easiest and quickest way to make an apple to apple comparison between funds.

Using data from Morningstar taken on the 24th of June 2016, I am able to obtain the (%) annualized returns for 3 Yrs, 5 Yrs and 10 Yrs for all 10 funds. Let's take a look how these funds fare against each other.

3 Yrs (%) Annualized Return
Data for 3 Yrs (%) Annualized Returns as of 24th June 2016:
Top 10 Shariah Unit Trust Funds according to 3 Yrs (%) Annualized Returns
Top 3 Ranking for 3 Yrs (%) Annualized Return:
  1. PMB Shariah Aggressive - 10.19% annualized
  2. Eastspring Investments Dana al-Ilham - 8.28% annualized
  3. Manulife Investment Shariah Progress - 5.95% annualized

5 Yrs (%) Annualized Return
Data for 5 Yrs (%) Annualized Returns as of 24th June 2016:
Top 10 Shariah Unit Trust Funds according to 5 Yrs (%) Annualized Returns
Top 3 Ranking for 5 Yrs (%) Annualized Return:
  1. Manulife Investment Shariah Progress  - 13.61% annualized
  2. PMB Shariah Aggressive - 13.36% annualized
  3. Eastspring Investments Dana al-Ilham - 10.92% annualized

10 Yrs (%) Annualized Return
Data for 10 Yrs (%) Annualized Returns as of 24th June 2016:
Top 10 Shariah Unit Trust Funds according to 5 Yrs (%) Annualized Returns
Top 3 Ranking for 10 Yrs (%) Annualized Return:
  1. Eastspring Investments Dana al-Ilham - 13.21% annualized
  2. Kenanga Syariah Growth - 13.04% annualized
  3. Public Islamic Opportunities - 12.93% annualized

Fund Size Comparison
Another key aspect for an investor should check is the size of the fund. The bigger the size of the fund, the harder it is to generate returns. In this blog post, I showed that 19 out of the 20 top performing funds in 2015 have fund sizes that are lesser than RM500 million.

Now let's take a look at the fund sizes for the top 10 Shariah compliant funds:
Top 10 Shariah Unit Trust Funds according to fund size
Key takeaway:
Shariah funds with RM500 million or lesser in size are worthy of consideration. In the above table, there are 8 funds (AmIslamic Growth, PMB Shariah Growth, PMB Shariah Aggressive, Manulife Investment Shariah Progress, Kenanga Syariah Growth, Affin Hwang Aiiman Grwoth, Manulife Investment Al-Fauzan and Eastspring Investment Dana al-Ilham) with fund size below the RM500 million threshold. 

Fund size is also an important criteria for investors to monitor on a regular basis. Once a fund get's too big (exceeds RM1 billion), an investor might consider switching to other equal or better performing funds which are smaller in size.

Fund Standard Deviation
Standard Deviation of a fund is defined as variation of a fund's returns around its average return. The higher the standard deviation, the more volatile the fund is. Now let us take a look a the standard deviation of the 10 Shariah funds:
Standard Deviation of the Top 10 Shariah Unit Trust Funds
Key takeaway:
The standard deviation of a fund go hand in hand with the type of strategy that an investor uses. A lump sum investor might prefer to go for a lower standard deviation fund. On the other hand, an investor that uses the DCA method would prefer to select a fund with high standard deviation as the fund's volatility are seen as opportunity to purchase units at low prices.

Fund Actual Annual Returns
Earlier I showed the (%) Annualized Returns for each fund over a 3, 5 and 10 Year period. Another way to evaluate the Top 10 Shariah funds is to look at the actual annual returns. First let us take a look at the actual annual returns of the 10 Shariah funds from 2009 right up till 2015.

Actual Annual Returns 2009 to 2015
Top 10 Shariah Unit Trust Funds Actual Annual Returns 2009-2015
From the table above, it is clear that each fund tend to perform differently on a year to year basis. However there are a couple of meaningful information which can be abstracted from the actual annual returns.

Number of Top 3 finishes from 2009 to 2015
Between 2009 to 2015 (7 years), some of the Shariah funds in the top 10 have performed consistently by placing top 3 yearly in terms of annual returns. Shown below are the statistic for the 10 funds in terms of number of top 3 finishes:-
Number of Top 3 Finishes for the 10 Shariah Unit Trust Funds
Graphical illustration of Number of Top 3 Finishes for the 10 Shariah Unit Trust Funds
Consistent Top 3 Finishers in terms of Annual Returns
  • Eastspring Investments Dana al-Ilham (4 times)
  • Public Islamic Opportunities (4 times)

Number of Ranked 1 Finishes from 2009 to 2015
Going one level higher in terms of comparison, is the number of times a fund has finished at the top of the ranking on a yearly basis. Over a span of 7 years, you can see that only 4 funds have managed to achieved the number 1 rank in terms of annual returns as shown below:-
Number of Ranked 1 Finishes for the 10 Shariah Unit Trust Funds
Graphical illustration of Ranked 1 Finishes for the 10 Shariah Unit Trust Funds 
Ranked 1 Finishes in terms of Annual Returns
  • Eastspring Investments Dana al-Ilham (2 times)
  • PMB Shariah Aggressive (2 times)
  • Kenanga Syariah Growth (2 times)

Number of times the Annual Returns Exceeds 10%, 15% and 20% from 2009 to 2015
This is another interesting comparison to make. Based on the annual returns from 2009 till 2015 (7 years), we are going to see how many times each fund was able generate returns of 10%, 15% and 20%.
Number of times the 10 Shariah Funds exceed 10%, 15% and 20%
Funds with 7 Consecutive Years of Positive Returns
  • Eastspring Investments Dana al-Ilham
  • Manulife Investment Al-Fauzan

Funds with highest number of Annual Returns (Exceed 10%)
  • Eastspring Investments Dana al-Ilham (5 times)
  • Manulife Investment Al-Fauzan (5 times)
  • Public Islamic Opportunities (5 times)
  • Kenanga Syariah Growth (5 times)
  • PMB Shariah Growth (5 times)

Funds with highest number of Annual Returns (Exceed 15%)
  • Public Islamic Opportunities (5 times)

Funds with highest number of Annual Returns (Exceed 20%)
  • Eastspring Investments Dana al-Ilham (3 times)
  • Kenanga Syariah Growth (3 times)
  • PMB Shariah Growth (3 times)

Summary
A comparison between the current 10 best Malaysia Equity Shariah funds using 4 different criteria yielded some interesting results.

The % Annualized Returns comparison especially for 3 Yrs, 5 Yrs and 10 Yrs was dominated by Eastspring Investments Dana al-Ilham. Upcoming PMB Shariah Aggressive is also making headlines especially in the last 5 years.

In terms of Fund Size comparison, we see that 8 out of the 10 funds are still below my personal threshold of RM500 million. Fund that are smaller in size generally tend to generate higher returns.

The Standard Deviation comparison does not yield any winner in particular. As explained in the standard deviation portion, funds with lower standard deviation are more suitable for lump sum investment while funds with high standard deviation would do well for investors practicing the DCA strategy.

The final criteria of Actual Annual Return comparisons were broken into 3 parts. The first part compared funds in terms of number of top 3 finishes annually. Once again Eastspring Investments Dana al-Ilham stands out along with Public Islamic Opportunities. 

The second part showed the number of Ranked 1 finishes in terms of annual returns. This comparison highlighted the strength of Eastspring Investments Dana al-Ilham, PMB Shariah Aggressive and Kenanga Syariah Growth fund as each fund finished twice at the top of the pile over a period of 7 years.

The third part is a statistical display of number of times each fund was able to generate returns exceeding 10%, 15% and 20%. Results showed that half of the funds were able to generate 10% or higher returns in 5 out of the 7 years. For returns of 15% or higher, only Public Islamic Opportunities was able to achieve 5 times in a span of the 7 years. Lastly only three funds were able to achieve 20% or higher returns for as many as 3 times over a period of 7 years. The outstanding funds are Eastspring Investments Dana al-Ilham, PMB Syariah Growth and Kenanga Syariah Growth.

Based on the comparisons made, an investor should have no problem in identifying which funds are the cream of the crop. It is my greatest hope that by providing a fair and equal comparison among these top funds, investors would be able to make wiser decision in terms of which fund to invest into. 

Cheers and happy investing!

P.S : 
  • Are you already invested into unit trust? Why not let me check for you how your funds compare against that of the 5 STAR rated ones. Just drop me an email at shanesee03@gmail.com if you like me to do a check for you!
  • Eastspring Investments Dana al-Ilham, PMB Syariah Growth, PMB Syariah Aggresive and Kenanga Syariah Growth can be invested online at very low sales charge. Find out how you can use eUnittrust to invest into these funds. Just click HERE to find out more!
  • I've recently launched an online learning platform called Unit Trust Made Easy to help Malaysians to kick start their own unit trust investment. For further details, check it out HERE

1 comment:

  1. this is great!. Thanks for your analysis.

    -aiman-

    ReplyDelete