Introduction
Unit Trust is an investment tool that provides individual a well diversified of investment portfolio that is managed by a unit trust management companies. This type of investment has a history in Malaysia started from the year 1959. Until today, there are total 534 unit trust funds was launched in the market and all the funds are managed by 39 unit trust management companies that registered in Malaysia. (Securities Commission Malaysia, 2010)
The investor invest in unit trust is because the larger pool of funds is managed by well experienced fund managers, therefore the fund managers will help the investors to diversified their investment. Besides, it is liquidity and lower cost to purchases the unit. Attractive returns and save time is also the advantages to attract investors to select this investment tools, it is because the fund manager's expertise should make the unit trust perform better than average investment scheme.
There are several types of unit trust funds that are equity fund, fixed income fund, property fund, Islamic fund and balanced fund. Each type of funds will have different objectives and investment strategies. Therefore, the different type of funds will have different risk level that suitable for different risk tolerance level investors.
In this research, we will examine the relationship of the types of unit trust fund investment and its performance during the pre and post Asian financial crisis period. The type of unit trust funds that we want to investigate is equity fund and bond fund, and the period is starting from the year 2000 until year 2009.
In this chapter, we will discuss about the background of this study, the problem statement, research goal, objectives, justification of study, the scope of study, research limitations and the outline of research project report.
1.1 Background of Study
Unit trust fund in Malaysia is an investment tools created by asset management companies specializing in pooling savings from both retail and institutional investor. Individual investor seeking liquidity, portfolio diversification and investment expertise are increasing choosing unit trust funds as their investment vehicle. However, these investors do differ in their preferences based on their risk threshold, liquidity needs and their needs to comply with religious requirement.
Over the past decades, Malaysian capital market has been growing at a very fast pace and this have been supportive of the various complex needs of the country. In 1959, a unit trust was first established by a company called Malayan Unit Trust Ltd. In the period from year 1959 to 1979, there only five unit trust management companies were established, with a total of 18 funds introduced. Currently there are total of 39 unit trust management companies and 534 unit trust funds are launched in the market. (Source: Securities Commission Malaysia)
The financial crisis of 2007 until late of 2008 is a financial crisis that triggered by a credit crisis from United States banking system. During the period, one of the world's largest banks, Lehman Brothers was filed for bankruptcy and the Merrill Lynch & Co was acquired by the Bank of America because of financial problem. Besides, the US Federal Reserve had to rescue the biggest insurer in America, American International Group (AIG) because the liquidity shortfall. (Nik Azhar Abdullah, 2008)
After that, there is a ripple effect of panic and worry spread across around the world and investors here are at a lost with their next course of action. The housing markets in US also collapse because of the global housing bubble. These situations make the values of securities drop because some securities values are tied to the property market. The drops of the investor confidence make an impact into global securities market, the ripple effect has a large damaged on the global financial institutions. (Nik Azhar Abdullah, 2008)
In Malaysia, because of the economic slowdown, the credit for consumers in selected sectors such as mortgage and auto is still available but the loans to corporations have been tightened. Although in the financial crisis period, the Malaysia economy still in growth path as the interest rates remains low. (Nik Azhar Abdullah, 2008)
In addition, Malaysia is blessed by natural resources such as palm oil, oil and gas. This natural reserves gives room for 'maneuverability' and the country will not be as severely affected as others. Taking into consideration the global economic slowdown and inflationary woes, most of the financial institutions have dropped their growth forecasts for the Malaysian economy. (Nik Azhar Abdullah, 2008)
Research Problem
According to Ooi Kok Hwa, 2009. He was mentioned that a lot of traditional unit trust fund suffered huge losses on year 2008 and year 2009 because of the sharp stock market crashes in September and October 2008.
Even though the performance of those funds has recovered greatly over the past few months, the bad experience has caused some investors, especially those with low risk tolerance, to sell a big portion of their holdings as they felt very uncomfortable with the risks involved.
Because of the performance in unit trust market is difficult to determine. Hence, this research is to examine what is the relationship between the different types of unit trust fund and its performance in Malaysia during the pre and post Asian financial crisis. The pre and post Asian financial crisis that we want to investigate is from the year 2000 until year 2009.
Research Goal
The research goal for this study is to determine the relationship between the types of unit trust funds and its performances in Malaysia during the pre and post Asian financial crisis period. The period that we want to investigate is from year 2000 until year 2009.
Research Objective
The objective of this research is to examine the relationship between the types of unit trust funds and its performance during the pre and post Asian financial crisis period. That is from year 2000 until year 2009.
Justification of Study
Since unit trust has launched in Malaysia for more than 50 years, and the net asset value of total unit trust funds in Malaysia has doubled from the year 2005 to year 2010. That is from RM 98.485 billion to RM198.217 billion. It shows that this industry still have a large potential to attract the investors make investment on this market. But there are many types of fund in the market and make the investor confused which fund would be more suitable for the investor. (Securities Commission Malaysia, 2010)
This research is to examine the relationship between the types of funds and its relationship during the pre and post Asian financial crisis that is from the year 2000 until year 2009. Therefore, this study can help investor to make clear about the different types of fund, especially is the different between equity fund and bond fund. Besides, we also can find out the performances of the unit trust funds during the pre and post Asian financial crisis from the year 2000 until year 2009. Furthermore, we will use KLCI index as the benchmark for this research and compare its performance with the unit trust funds during the pre and post Asian financial crisis period. This can help the investor make decision on select the unit trust funds that are suitable their investment objectives.
Scope of Study
The scope of study for this study is focus on the relationship between the types of unit trust funds investment and its performance during the pre and post Asian financial crisis. There are only 2 types of fund were selected in this study, which are equity fund and bond fund. Hence, 54 funds out of total 534 funds in the market were selected for this research that is included 48 equity funds and 6 bond funds. All the selected funds is managed by total 16 companies, there are total 39 unit trust management companies in Malaysia. Besides, the period we want to investigate is from year 2000 until year 2009.
Research Limitations
For this topic, the Asian financial crisis is starting from year 2007, therefore there is no much research is discuss on its impact on Malaysia unit trust market. Hence the limited information we can obtained is one of the research limitations in this study. Besides, the finance source for printing and collected the data also is also a limitation for this study. Other than that, this study is only used KLCI index as the benchmark to compare the performance of the unit trust funds. The result could be more reliable if using more than 1 benchmark in future research.
Outline of Research Project Report
In this research can be divided into 3 chapters. Chapter 1 is discuss about introduction of this research, it is included introduction, background of the study, problem statement, research goal, objectives, justification of study, scope of study, research limitations and outline of this research project report. Chapter 2 is mainly discuss about the literature review, the content is included the definition, the history of unit trust industry in Malaysia, act and regulations in investment, types of unit trust fund, benefits of invest in unit trust, and review of previous studies. Lastly the chapter 3 is discuss about the research methodology, it is included the research framework, description of variables, hypotheses of study, techniques, source of data, data collection method and data analysis for this research.
