The Investment Performance of Unit Trust Funds in Malaysia

Abstract

This paper investigates the investment performance and ranking of a sample of twenty one unit trust funds in Malaysia for the period January 1984 to December 1993. It also includes an investigation into the consistency of performance of the funds over time, the degree of risk diversification, the stability of the funds’ systematic isk over time, adherence of funds to their stated objectives and ability of fund managers to predict security prices. The impact of fund characteristics such as age, size, portfolio turnover and expense ratio on investment performance and systematic risk was also investigated. ‘The findings revealed that the funds as a whole performed worse than the market portfolio. ‘Their performance was quite consistent and their market risks were stable over time. They also held quite well diversified portfolios. Generally the funds did not adhere very well to their stated objectives and all the fund managers could not forecast security prices and failed to outperform the naive buy and hold strategy. The research also revealed that the fund characteristic, expense ratio has a negative correlation with investment performance, with the larger funds and funds that practise active trading being more risky. The older funds however ‘were more risk averse.