Abstract
This study measured the efficiency of fixed income unit trust funds and equity unit trust funds for the period of January 2004 to December 2014. A total of 36 fixed income funds and 109 equity funds were evaluated using stochastic frontier analysis (SFA) technique with three inputs (expense ratio, portfolio turnover ratio, and fund management stated fee) and one output variable (return). The econometric technique was used to measure the portfolio efficiency score as well as to compare the efficiency of fixed income funds and equity funds. The results indicated that the average efficiency score for equity unit trust funds was higher than fixed income unit trust funds. Nevertheless, when the samples were categorized into panel data, the average efficiency score for fixed income funds increased throughout ten years. Meanwhile the average score for equity funds was consistent over the years. It shows that time is invariant for equity funds. However, this means that the performance efficiency for both types of funds was considered excellent and efficient. The results indicate that the mean efficiency achieved in unit trust industry is almost 100% of its potential output.
Highlights
The performance of unit trust funds has received a lot of attention from both, industry and academic fields
Analysis/Results: The technical efficiency of the panel data which consists of 360 observations of fixed income funds and 1090 observations of equity funds were generated using Frontier Version 4.1 software through the maximum likelihood technique according to Coelli (1996)
The results shown in Table 5 indicated that the average of technical efficiency score of fixed income funds and equity funds from 2005 to 2014 slightly increased throughout the years
Summary
The performance of unit trust funds has received a lot of attention from both, industry and academic fields. This is due to the percentage of net asset value of unit trust funds to Bursa Malaysia market capitalization of 20.69% and 21.07% for 2014 and 2015 respectively (Securities Commission). As shown by the nominal GDP percentage, the equity market capitalization and outstanding debt securities account for approximately 165% and 97%, respectively in 2010. Outstanding debt securities in Malaysia have contributed 97% to the nominal GDP despite showing an increasing upward trend. In terms of growth in equity market, the market size was RM2.0 trillion in 2010 as compared to RM717.5 billion in 2000 (Securities Commission)
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