Sunday 26 June 2022
Dissatisfaction of the Unit Trust Industry, are you aware?
Friday 17 June 2022
Is Investing into Award Winning Funds A Good Strategy? (Part 2)
Recap of Part 1
In Part 1 of this article, we analyzed how Award Winning Funds in 2017 under the "Malaysia Equity" categories are performing as of today as well as compare the funds against the rivals in the category.
We concluded in Part 1 that investing into Award Winning Funds under the Malaysia Equity category is not the best strategy for investor to utilize when it comes to selecting fund to invest into.
Check out the full post for Part 1 HERE
Part 2 Analysis
For part 2, we analyze how Award Winning Funds in 2017 under the "Mixed Assets" categories perform. Using the similar approach, we will try to answer the following:
- If one was to invest into award winning funds in 2017, what would be the performance (cumulative returns) of the funds as of today?
- Are those award winning funds in 2017 remain as leader (the best) as of today or other rival funds within the same category have better result?
We will derive the following outcomes in order to answer the 1st Question:
- The cumulative returns (%) of the award winning funds from 2nd March 2017 (a day after result was announced) to 1st June 2022
- The estimated annualized return of the award winning funds
- Are the estimated annualized return of the award winning funds is higher than 5% ? Otherwise it would be wiser to invest your money in ASB, ASNB or just leaving it in EPF
Derived outcomes of 2017 Lipper Award winning funds under the group of "Mixed Assets" for 3 Years and 5 Years
Clearly from the table above, 71.4% of 2017 Lipper Award winning funds have performed poorly over the past five years (5 out of 7 funds under the "Mixed Assets" categories). Note: Poor performance in this analysis is defined as less than 5% in annualised returns.
2. Are those award winning funds in 2017 remain as leader (the best) as of today?
The analyis for Question 2 comes as no surprise with rival/competitor funds under similar categories of the 2017 Lipper Award winning funds performing multiple times better.
We also observed that annualised returns of rival/competitor funds for all categories exceed the 5% benchmark. In other words, investing into rival/competitor funds have better risk vs reward outcome.
Similar to the outcomes in Part 1, investing into award winning funds under "Mixed Assets" category also produced similar fate as award winning funds under "Malaysia Equity" category. We can safely conclude that performance of majority of award winning funds tend to degrade after garnering alcolades (approximately 70% and above).
As an added bonus, we have another hypothesis which we intend to validate and published under Part 3, so stay tune and Follow our Facebook for updates!
Cheers and Happy Investing
Sunday 12 June 2022
Analysis of Fund Performance versus Fund Size
- Out of the 20 funds, there are 2 funds which we deem as outlier and have been excluded from the graph above
- The remaining 18 funds have 3 Yrs Annualised Returns ranging from 16.44% to 29.45% (which is pretty impressive!)
- All remaining 18 funds clearly have fund size that are lesser than RM250 million
- 15 out of 20 funds (75%) have fund size that are lesser than RM150 million
- The Top 3 best performing funds averages 27.49% in terms of 3 Yrs Annualised Returns with average fund size of RM 71.57 million
- When deciding between two or more funds that are equal within the same category, go for the fund with the smaller fund size. This allows an investor to find the best cut gems within existing gems
- Try to use the general guideline of not investing into funds that are larger than RM150 million in size.
- Perform due dilligence to verify funds that fall under the "Feeder Fund" category, for the rule of using fund size is not applicable
- Do not use this criteria alone to select fund.