Abstract
This study examines the relationship between fixed income unit trust funds and equity unit trust funds for the period of January 2006 to October 2012. The performance of both types of funds are then compared to the market benchmark to determine whether they outperformed the market benchmark. The performance comparisons are made over several categories of equity sample namely overall equity, growth equity and value equity. The Kuala Lumpur Composite Index (KLCI) is used as the market benchmark for equity funds and fixed income funds with additional market benchmark of Maybank 12-month fixed deposit. A total of 31 fixed income funds and 57 overall equity funds which are made up of 37 growth equity and 20 value equity are evaluated by using three performance measures namely Treynor index, Sharpe index and Jensen index. The results indicate that the mean returns of equity funds are higher than the fixed income funds and market benchmark of KLCI. Nevertheless, when equity funds are compared against fixed income funds using Wilcoxon Signed Rank Test, Sharpe and Treynor ratios produce significant results. This means that the performance of fixed income funds varies from the performance of equity funds. However the Jensen index produces insignificant result. When the sample categorised into different equity types of funds, the finding shows a conflicting result. The Sharpe and Jensen ratios indicate insignificant results for growth equity funds sample. This means that the performance of fixed income funds is not different from that of equity funds in comparison to Treynor that shows a significant result. As for the value equity, Sharpe, Treynor and Jensen produce results that are significant. This means that the performance of fixed income funds varies from that of equity funds.
Highlights
Unit trust funds industry in Malaysia has seen a tremendous growth in the last 58 years ever since they were first introduced in 1959
The Malaysia 90-day Treasury Bills has the lowest return as compared to the fixed income unit trust funds, Kuala Lumpur Composite Index (KLCI) and Maybank 12-month fixed deposit rate as its standard deviation and beta of 0.0001 and –0.0006 respectively, were the lowest
Risk and return analysis of fixed income and equity unit trust funds is revisited in this study to provide investors better information before investing in unit trust funds
Summary
Unit trust funds industry in Malaysia has seen a tremendous growth in the last 58 years ever since they were first introduced in 1959. Upon the establishment of Securities Commission (SC) on 1 March 1993 and the implementation of Securities Commission (Unit Trust Scheme) Regulation in 1996, the industry started to pick up. From only 18 funds in 1979, the number increased to 637 unit trust funds in March 2017, which is a growth of 3438% for the last 38 years or an average annual growth rate of 90%. As at 31 March 2017, the percentage of NAV of the unit trust funds industry to the Bursa Malaysia market capitalisation is 21.79% (Securities Commission Malaysia, 2017). This study would focus on these two funds
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