The first chapter in this research project is about the introduction of the government sponsored unit trust fund investment. It consists of seven parts which are definition of government sponsored unit trust fund investment, background of research, justification, problems statement, research objective, research scope and limitation and organizational research.
Background of Research
According to the Federation of Investment Managers Malaysia (FIMM) (2011), Malaysia first try to introduce the unit trust concept more early compare with other Asian countries. A unit trust was first established by a company called Malayan Unit Trust Limited Company in 1959 and unit trust industry already has 52 year history in Malaysia. The return on the investment of unit holders is normally in the form of interest distribution and capital appreciation and get from the pool of assets supporting the unit trust fund. Every unit gains the same rate of return determined by the distribution level or capital appreciation in a period.
The unit trusts investors are normally refer to those who want to invest but neither have the times nor the willing to hold portfolios of direct investments. They are more preferred to invest in a low risk, honorable investment vehicle which suits to their investment purposes and objective as well. The unit trusts investments are allow investors to have easy access to a wide range of investments which not normally available for them to invest. The investors always seek to maximize their profits on their investment so unit trusts provide an easy and good way for them to gain more profits in the long run. The risks that occur in the investment will lead to a higher cost of investment. In the short run, the definitely of investment returns of most unit trust products is less than fixed deposits investment. However, in the medium to long run, the unit trust investments generally will provide a satisfaction returns compare with short run at acceptable level of risk (FIMM, 2011).
Malaysia unit trusts investment can consider as a type of collective investment that consent the investor to pool their money or funds to be invest in a portfolio of securities or assets. A professional fund manager will manage and invests the pooled funds in a portfolio which include cash, bonds, deposits, shares, properties and commodities. On other hand, the unit trust holders or investors do not own any of the securities or assets in the portfolio directly. The fund ownership will be divided into units of entitlement. The value of each unit will depends to the fund performance in value. The unit holders will hold a sum of units which is depends on the unit purchase price and the amount of money invest in the funds (FIMM, 2011).
1.2.1 Malaysia Unit Trust Framework
In Malaysia, unit trust investment is involved between the investors, trustee and the management company of trust fund which is the key elements in unit trust investment activity. There was a legal document call deed to link all of the three parties in the unit trust investment. The deed state out the obligation of the fund management company, trustee as well as investors in the unit trust fund investment. The investors play the role to pool all the money and invest in the unit trust fund through professional unit trust fund management company. On other hand, the management company play role to collect all the money and administers the daily operation of the fund. The fund managers will use the money and invest in different type of investment product such as shares, bonds, foreign currencies, fix deposits and others. While the trustee in the unit trust fund play a role to safeguards the interest of the unit holders. The trustee in the government sponsored unit trust fund normally is the government officials. The figure 1.0 shows the framework of Malaysia unit trust.
Figure 1.0
Framework of Malaysia Unit Trust
Investors
(Invest in the fund)
DEED
Trustee
(Safeguards the interest of unit holders)
Management Company
(Administers the operations of the fund)
A legal document that sets up the obligations of
the trustee and the management company as well
as the rights and liabilities of the unit holders.
(Source: Areca Capital Sdn Bhd, 2011)
Malaysia unit trust investment can differential into two categories which are private unit trust funds investment and government sponsored unit trust funds investment. Private unit trust funds are managed by the licensed private unit trust companies in Malaysia while the government sponsored unit trust funds are managed by the government related compnay Amanah Saham Nasional Berhad (ASNB) which is a wholly owned subsidiary company of Permodalan nasional Berhad (PNB). Private unit trust fund is differ with government sponsored unit trust fund from some aspect such as management company, risky, return on investment, fund type, fees charge and other. The different between private unit trust funds and government sponsored unit trust funds in Malaysia can be showed in Table 1.0.
Table 1.0
Difference between Government Sponsored Unit Trust Funds and Private Unit Trust Funds
Private Unit Trust Funds
Field
Government Sponsored Unit Trust Funds
Malaysia Licensed Private Unit Trust Companies
Management Company
Permodalan National Berhad (PNB)
Middle / High
Risky
Low / Middle
> 5% - 7% (depend on market performance)
Return on Investment
> 5% - 8% (depend on market performance)
Close-end Fund
Fund type
Open-end Fund
Fix Price Equity Fund
(Some Equity Funds' price per unit is based on Net Asset Value (NAV)
Administration fees
Sales fees
Fees charge
Nil
*Some Equity Fund charge sales fees
(Source: developed by the researcher)
Net asset value (NAV) refers to the value of an entity's assets less the value of liabilities (Wikipedia, 2011). Net asset value is normally used in relation to open-ended funds or mutual funds because of the shares of funds registered with the U.S.A Securities and Exchange Commission are fulfilling at their net asset value. However, the net asset value can also be used for the equity value or book value of a business. Net asset value may refer to the value of the total equity. Net asset value can be divided by the number of shares outstanding held by the investors become net asset value per share.
Private unit trust has its own advantage and potential to attract investors to invest in unit trust investment. Private unit trust is managed by the private unit trust companies and they have their own strategies and management way to control and manage the portfolio investment to create profits for the trust funds. Private unit trust is a self-contained investment portfolio that is sketched to shelter the different family member's investment. Every investor is allowed to put their money into these carriages as they must have to issue a prospectus and public contributions. Private unit trust is differing with the government sponsored unit trust from the fees charge, risky, management company and fund type (Trust-Estate Limited, 2011).
As we know that the largest private unit trust company in Malaysia is Public Mutual Fund. Public Mutual is a wholly owned subsidiary for Public Bank contributes glad to the group's excellence corporate culture and good in financial integrity in the management of the unit trust funds. Public Mutual Fund currently has manages more than 80 funds. The total net asset value of funds is RM40.7 billion and they have around 2,420,000 unit holders. Public Mutual began their operations in 1980 with the launch of the Public Savings Fund and after that they went on to become the unit trust industry leader and setting forth new directions in modernity fund development. Nowadays Public Mutual fasten on 44.1 percent market share in the private unit trust funds industry (Public Mutual Berhad, 2011).
On other hand, the government sponsored unit trust funds investment is manage by the Amanah Saham Nasional Berhad (ASNB) which is the wholly owned subsidiary company of a government related company Permodalan Nasioanl Berhad. The Amanah Saham Nasional Berhad (ASNB) has managed around 9 government sponsored unit trust products. Government sponsored unit trust funds in Malaysia can consider as popular and preferable investment instrument. The Malaysian is more prefer to invest in the government sponsored unit trust funds is because of the good performance of government sponsored unit trust funds recently. For example, Amanah Saham Wawasan 2020, Amanah Saham Bumiputr and Amanah Saham 1Malaysia each has a good performance in year 2010 with above 6 percent interest return distributed to the unit holders. The average unit holders of each unit trust products is around 250,000 to 880,000 unit holders which depend on the size of the trust funds (Amanah Saham Nasional Berhad, 2011).
1.3 Problems Statement
Nowadays the unit trust industry in Malaysia is getting rapidly growth and the people know that Malaysian government already decided to enter into the industry by launching a government sponsored unit trust known as Amanah Saham National (ASN) through Permodalan National Berhad on the late 1960. The primary intention of launching the government sponsored unit trust was to help improve and enhance the native Malays' social economic status in the country. Thereafter, the growth of the government sponsored unit trust has been enormous especially on the period from 1991 to 1996. The Asian financial crisis happen on 1997 lead to the development of the unit trust industry was slightly obstructed at that time. The performance of the government sponsored unit trust was going down during Asian financial crisis but not so bad seriously as compare with other country government sponsored unit trust. The unit trust industry in Malaysia has strong ability to face financial crisis and began getting rapid growth after the difficult period. This could be observed from the number of management company increase from 13 in 1992 to more than 50 in 2007. Strong economic, good stock market performance, expansion of the local stock market and success of the privatization companies are the factors that contributed to the good performance and rapid growth of unit trust industry (A. Yahaya et al, 2009).
Although the speed of growth for government sponsored unit trust funds has restrained after the Asian financial crisis of 1997 but it still has notwithstanding maintained its upward direction and potential to grow. The unit trust industry has a very hopeful and favorable in 21st century after the Asian Financial Crisis 2007. The unit trust industry enrolls double digit growth in year 2000 until year 2007. The net asset value in year 2000 was RM 43 billion and it grow to RM 169 billion in year 2007. However, this strong growth performance has been obstructed by some noteworthy factors such as world financial crisis happen in 2008 which starting from the fallout of the subprime loans in the U.S.A, rupturing of the property bubble, the global credit crisis, world banking crisis and the speedy falling share prices worldwide create investors lose confidence to the financial market. In 2008, the Malaysia unit trust industry's' net asset value dropping to RM 134 billion because of the government sponsored unit trust investors are lose confidence to unit trust market and they also facing lack of capital to invest in government sponsored unit trust. While the unit trusts industry net asset value has dropped by 20 percent over the last 10 months in year 2008. But, the net asset value to Bursa Malaysia Market Capitalization has increased from 15 percent to 20 percent. This show the unit trust industry drop is less harsh than other investment products in Bursa Malaysia due to the diversification characteristic of unit trust products (pbmutualli, 2011).
From this, people can know that the government sponsored unit trust investors are still very confidence and attract to our unit trust industry after the financial crisis 2008. Based on the information given by the Amanah Saham National Berhad, the current unit holders of the Amanah Saham National is more than 10 million peoples include young citizen who age from 18 until 35 and middle-aged citizen who age above 35 years old. They hold more than 1.5 billion units of Amanh Saham National. The investors still hold strong confidence to the government sponsored unit trust investment and they feel that government sponsored unit trust is the only way can guarantee a satisfaction return with low risk compare with other financial products after the financial crisis 2008. Nowadays the young generation is getting more preferred and confidence to invest in government sponsored unit trust investment compare with middle-aged citizens is because they are risk taker compare with middle-aged citizens. We can prove that by some examples such as Amanah Saham National Berhad announced the launch of RM 1.6 billion additional units of Amanah Saham Malaysia (ASM) open for contribution to all Malaysians on July 2009 and all of the units have been fully bought by citizens included young generation as well. Furthermore, the RM2 billion additional units of the Amanah Saham Wawasan 2020 opened for contribution to all non-native (non-Bumiputera) citizens part have been fully sold too. The sale of those unit trust is completed in just a few hours reflects that high confidence level of the non-native (non-Bumiputera) citizens especially young generation investors towards Amanah Saham National products. Another example is Amanah Saham Wawasan 2020 was launched in August 1996 with a fund size of RM 3 billion units but nowadays the total fund size already rose at RM 12.42 billion units (ASNB, 2011).
Public Mutual Berhad now had been achieved as the top private unit trust company in Malaysia based on the variable price products but Amanah Saham National Berhad (ASNB) still can be a unit trust market leader is because of the fixed price products they offered where the other management companies cannot compete with them. This make Amanah Saham National Berhad differ from other private unit trust management companies since fixed price products are more trustable compare with variable price products (A. Yahaya et al, 2009).
There have three research question of this study.
What is the relationship between governments sponsored unit trust investment and young generation?
Why government sponsored unit trust investment more attractive compare with private unit trust investment?
What is the motivation and quality of government sponsored unit trust?
1.4 Research Objective
The research objectives from this research about government sponsored unit trust are:
To investigate the relationship between the governments sponsored unit trust and the young generation.
To explore and identify the factors that influence the perception of young generation toward government sponsored unit trust.
To investigate the understanding of young generation about the government sponsored unit trust.
To identify the quality of the government sponsored unit trust funds.
1.5 Research Scope
The major objective of this research project is to find out the factors that affected the generation Y perception toward the government sponsored unit trust investment. This research study will examines the factors affected the perception of generation Y toward government sponsored unit trust investment such as generation Y satisfaction, level of trust, dependency and understanding toward the government sponsored unit trust investment.
The data of this research project will be collected through distribution of questionnaires. The target respondents are Melaka generation Y who age from 18 until 35 included university students and university staff. After collected all of the data, the researcher will use Statistical Package for the Social Sciences (SPSS 19.0 Version) software for the purpose of statistical analysis of the research study.
In this research study, 200 respondents will be randomly selected based on their difference in state of employment, age, gender, race, marital status and educational level.
1.6 Research Limitation
The research limitation that can be founded from this research study is timeless. There has only around two month time to complete this research. The researcher has face the burden and difficulties of run out of time when try to complete this research study in a very short time. Besides that, the cost to complete this research study is the other one research limitation since the researcher is a student. The researcher need to responsible to the cost of materials and cost of printing to complete this research project. The other research limitation is the respondents may not really understand about the government sponsored unit trust investment. They will try to simply answer on the questionnaires paper without reading or understand clearly to the topic. Some of the respondents may try to make the questionnaires paper blank or forget to return back the questionnaires paper to the researcher.
1.7 Justification
The purpose of the study is to find out the generation Y perception toward the government sponsored unit trust investment in our country nowadays. The issue regarding government sponsored unit trust has raised attention of the public. As we know that generation Y is getting interesting on government sponsored unit trust but there are still a lot of younger people do not have clear image and understand about the government sponsored unit trust. Besides that, some people will feel less confidence and misunderstanding to government sponsored unit trust fund, so the researcher hope that throughout this research project, the understanding and knowledge about government sponsored unit trust can be distribute to the public and Malaysia government to have clear picture about government sponsored unit trust investment. The government also can use this study to understand about the perception of generation Y in our country toward government sponsored unit trust and try to improve it to attract more generation Y as well. The Amanah Saham National Berhad can take this golden opportunity to understand more what generation Y's willing toward government sponsored unit trust investment.
Organizational Research
The chapter 1 of the research project is about the introduction of government sponsored unit trust. In chapter one, it includes overview of chapter one, research background, research questions, research objectives, justification of the study, research scope and limitation, and organizational of research.
While in chapter 2 will show out the dependent variable and independent variables as the foundation to the building of theoretical frameworks and developing hypothesis.
Chapter 3 is the chapter about research methodology. Research framework and hypothesis are developed in order to predict the relationship between the dependent variable and independent variables. After that questionnaire design will be done to explain how the questionnaires will be developed. Besides that, the other elements in chapter 3 are population and sampling, data collection method and techniques of analysis.
Chapter 4 is about the data analysis. The researcher will analyses the result which collected from the respondents and the result and discussion are conducted by Statistical Package for Social Sciences (SPSS 19.0 Version) program too.
Chapter 5 is about conclusion and recommendation. Researcher will conclude and give some recommend to this research study.
1.9 Conclusion
As a conclusion, a clear picture about the government sponsored unit trust and the private unit trust in Malaysia is shown out to public. The researcher want to find out the relationship between the government sponsored unit trust investment and young generation and try to investigate the quality and motivation of government sponsored unit trust investment compare with the private unit trust investment.
