Measuring Unit Trust Fund Performance Using Different Benchmarks

Abstract

‘This study examines the investment performance and ranking of unit trust funds in Malaysia using different market portfolio as benchmark portfolio to analyse how sensitive the benchmark affects the fund performance. Two different benchmarks used are the Kuala Lumpur Stock Exchange Composite Index (KLSE CI) and the Kuala Lumpur Stock Exchange EMAS Index (EMAS). The findings revealed that for the period from January 1984 to December 1996, the majority of the funds in the sample of 32 private unit trusts performed worse than both the KLSE Cl and the EMAS market portfolios. It was also found that the funds were not as diversified as the market portfolios and few fund managers had the forecasting ability to outperform the “buy and hold” strategy. When EMAS was used as the benchmark portfolio, most funds performed better, most funds were more closely diversified, and more funds had forecasting ability to outperform the market. However, the choice of benchmark portfolio did not have much impact on the performance ranking of the funds.