Unit Trust Funds Research Articles

Analisis Kecekapan Relatif bagi Industri Saham Amanah Menggunakan Pendekatan Ekonometrik

Makalah ini bertujuan untuk mengukur kecekapan relatif industri saham amanah di Malaysia menggunakan kaedah Analisis Sempadan Stokastik (ASS) bagi tahun 2003 dan 2004 yang terdiri daripada 65 buah dana daripada 16 buah syarikat pengurusan dana saham amanah di Malaysia. Dana yang dikaji dibahagikan kepada tiga jenis, iaitu pertumbuhan, pendapatan dan Islam/Syariah menggunakan spesifi kasi Batt ese dan Coelli (1992). Analisis data dan keputusan kajian menggunakan program Frontier Versi 4.1 (Coelli, 1996). Kecekapan merupakan pengukuran penting yang boleh digunakan untuk menilai perkembangan dan pertumbuhan ekonomi sesebuah negara.

Unit Trust: An Appraisal of Applicable Laws

Unit trust (UT) is a difficult and dry subject and it would seem that this subject has not been extensively discussed by academic writers in Nigeria. The whole concept of the UT is premised on a mode of investment beneficial to both the small and big investors. It is a scheme designed to enable individual and/or corporations, especially institutional investors to pool together their resources for another corporate legal entity to make investment while they hold units in the scheme as evidence of the resources so contributed. This work is to serve as an examination of the legal framework of this unique system of investment by examining whether our laws relating to the UT addressed all the issues relevant to the effective and efficiency functioning of the UT scheme, and also whether the law facilitates the underlying objects of the UT scheme. In this regard, it would be appropriate to examine whether the existing legal framework regulating the UT in Nigeria sufficiently offers protection to the small investor, while allowing fund managers/trustees sufficient flexibility and scope to raise funds quickly and invest the funds so raised in the most rewarding and secure instruments. This work is also for students of both law and business management on the need to understand that the trust concept does not only lie within the ancient concepts of its doctrine, maxims and other equitable concepts, but that commercial trust, which is considered as a living trust is now the modern source of adventure for researchers and a veritable tool for commercial lawyers and investment advisers. This long essay is therefore is made up of four chapters. In the chapter one, this is the introduction, the history of the trust concept, the nature of trust, which will include the definition of trust and types of trust. Thereafter, the paper will consider how a trust is created, the history of unit trust and unit trust as specie of trust. Chapter two will consider the basic aspects of the UT. The chapter will deal with what the UT is all about. In expounding what UT is all about, the structure of the UT, types of UT, how the UT can be created, investments in the UT will be discussed. This chapter will also discuss the investment of UT funds as well as the management and administration of the UT. The regulation of the UT will be the focus of chapter three. First, I will review the objectives of regulation in this regard. After looking at the objectives of regulation, I will consider the legal framework of the UT is Nigeria. Then I will do a comparative analysis of the regulatory framework for the UT in Nigeria and the key aspects of laws regulating the UT in other jurisdiction, with special focus on Mauritius and the United Kingdom. Chapter four will review the current position of the law and practice, while pointing out any identifiable gaps in the law and attempting to define the way forward. It is intended that this work shall excite the interest of students in the law of trusts as well as generate further work in this area.

An Appraisal Of The Operation And Management Of Unit Trust Schemes In Nigeria

A lot of money is held by the public instead of being invested in shares or in money market instruments as a result of widespread financial illiteracy. Many people do not know that not only well-to-do people can invest in the shares of companies. This is because they are not aware of schemes like unit trust through which small savers can be participants. Both the individual and the nation are end-losers, as resources that could have been mobilized for economic growth are not accessed. The study undertakes a survey of causes of the low patronage of the unit trust scheme in Nigeria. The outcome of the survey shows that lack of publicity of the schemes is a major cause. It advises against in-house investment of unit trust funds and recommends an amendment of the existing regulation so as to make an investment in money market instrument a prior claim on assets of any company on liquidation of that company. JORIND Vol. 5 (1) 2007: pp. 35-41

A cross-sectional analysis of Malaysian unit trust fund expense ratios

This study examines the determinants of fund expense ratio in a cross-sectional sample of Malaysian unit trust funds. Since fund performance is a key decisive factor for many investors in selecting mutual funds, and given that fund expenses are an important determinant of fund returns, the information on what factors affect fund expense ratio is becoming more relevant than ever for investors when selecting a fund. The results show that larger funds have lower expense ratios than smaller funds, suggesting the presence of economies of scale. There is also evidence of economies of scope in that funds that belong to a large fund family are found to have low expense ratios. The findings further indicate that funds with high returns volatility are associated with low expense ratios and that high portfolio turnover leads to high expense ratio. There is no evidence that fund objective and fund age are related to fund expense ratio.

The price linkages between Malaysian unit trust funds and the stock market

PurposeThe primary objective of the paper is to examine the short and long run price linkages between Malaysian unit trust funds and the stock market index as proxied by the Kuala Lumpur composite index (KLCI) over the period 1996‐2000.Design/methodology/approachCointegration analyses are used to identify the long run relationship between unit trust funds and the stock market index while Granger causality tests are used to measure the short run price linkages.FindingsCointegration results show that the long run pricing performance of the unit trust funds differs significantly from that of the KLCI. Interestingly, the findings also reveal that two index funds are found not to be cointegrated with the stock market index. In the short run, one‐way Granger causality test shows that changes in the KLCI Granger causes changes in the unit trust funds. This suggests that fund managers are responding to the past changes in the stock market index over the short run.Research limitations/implicationsThe findings of non‐cointegration between passively managed funds and the KLCI are restricted to only two index funds in the sample among other actively managed funds. Since there were not enough index funds available over the study period, future research should include more index funds in the analysis.Practical implicationsIn the short run, investors may gather information on the changes in their portfolio composition by observing the movement in the KLCI.Originality/valueThe paper represents the first evidence on the pricing relationships between unit trust funds and the local stock market index and the findings are important to investors in terms of their investment strategies.

An integrated framework for style analysis: how is it useful to Malaysian equity trust investors?

PurposeThe Asian financial crisis revealed the weaknesses of Malaysian fund management industry. The financial losses incurred in the crisis brought forward the issue of asymmetric information between the fund managers and investors i.e. the mismatch between the investors’ investment objectives and funds’ profiles. This paper aims to demonstrate the usefulness of the new framework in mitigating the above problem.Design/methodology/approachThis paper advocates an integrated framework of style analysis, i.e. using strong‐form of style analysis by Sharpe – a multi‐indexed benchmark for estimating the investment style of the unit trust funds, and using the weak‐form of style analysis by Amenc, Sfeir and Martellini, to measure the risk‐adjusted performance of the funds with alpha and selection return.FindingsThis study concludes that: First, the inclusion of asset classes with negative correlation coefficient enhances the performance of funds. Second, funds with relatively high degree of style (above 70 per cent) that hold large‐cap stocks together with high portion of liquid asset class (6‐35 per cent) tend to have higher alpha, translating into higher information ratio. Third, index funds have the lowest information ratio, implying that these funds are not actively managed compared with others.Research limitations/implicationsThis paper discovers a possible trend of misclassification as the degree of styles for index funds does not differ from the other fund types. Future researchers can look into the issue of misclassification of fund objectives for the existing unit trust funds.Practical implicationsThis paper highlights the importance of the equity style management in bridging the gap between emerging capital markets and developed markets. One of the conclusions highlighted in the paper is the creation of new indices for different asset classes. Asset management companies are also advised to improve their disclosure in their annual reports to mitigate the issue of asymmetric information between fund managers and investors.Originality/valueTo the author's knowledge, this empirical work using integrated framework style analysis is the first of its kind on Malaysian unit trust funds. This paper is particularly useful to regulators of emerging capital markets and asset management companies.

Malaysian unit trust funds’ performance during up and down market conditions

Purpose – The paper seeks to examine whether selectivity and timing performance of fund manager is sensitive to the choice of market benchmarks. The two benchmarks used are the Kuala Lumpur Composite Index (KLCI) and the Exchange Main Board All‐Share (EMAS) Index.

Investigation of performance of Malaysian Islamic unit trust funds

PurposeOne of the implications of Islamic investment principles is the availability of Islamic financial instruments in the financial market. The main aim of this research is to observe the differences in terms of performance between Islamic and conventional mutual fund in the context of Malaysian capital market.Design/methodology/approachTo achieve the major objectives of this paper standard methods wereused for evaluating the mutual funds performance, for example, Sharpe index and adjusted Sharpe index, Jensen Alpha, Timing and selectivity ability. The scope of the paper is to measure the relative quantitative performance of funds which was managed based on two different approaches.FindingsThe basic finding of the paper is that Islamic funds performed better than the conventional funds during bearish economic trends while, conventional funds showed better performance than Islamic funds during bullish economic conditions. In addition to that finding, both conventional and Islamic funds were unable to achieve at least 50 per cent market diversification levels, though conventional funds are found to have a marginally better diversification level than the Islamic funds. The results also suggest that fund managers are unable to correctly identify good bargain stocks and to forecast the price movements of the general market.Research limitations/implicationsThe main limitation is that the samples of conventional and Islamic mutual funds were from one developing market. The findings could be better validated if the sample included the mutual funds from other developed and developing economies, where both Islamic and conventional funds are available.Practical implicationsThe findings suggest that having Islamic mutual funds in an investment portfolio helps to hedge the downside risk in an adverse economic situation.Originality/valueSo far there is no published evidence on the relative performance of Islamic and conventional mutual funds in Malaysia as well as other developing countries. Therefore, this paper adds new knowledge to the mutual funds literature.

Performance, persistence and benchmarks of selected South African unit trusts for the period 1998-2002

Fund managers in the South African unit trust industry have an objective of generating strong alpha returns, meaning average annual returns above the respective benchmark. This paper analyses the performance of twenty South African unit trusts, selected from various sectors over the 1998 – 2002 period. In all cases the benchmark used by the funds is the Johannesburg Stock Exchange All Share Index. The well-known Capital Asset Pricing Model and a three-factor Arbitrage Pricing Theory model are used in the analysis. The result shows that only four funds of the twenty analysed were able to generate a superior performance in one or more years of the five-year period. Individual unit trusts were unable to perform consistently for any length of time. The failure of the funds to meet their objective is further analysed in terms of the appropriateness of the JSE All Share Index as the benchmark. In some cases the index was not an appropriate benchmark to measure persistence in performance and sector indices were preferable. In a cross-sectional portfolio analysis there was evidence of overall persistence in performance but this was of short duration, related more to negative than positive persistence in performance. Overall, the results of the analysis do not produce convincing evidence that unit trust fund managers were able to generate consistent above average returns to their investors. Furthermore, it may be preferable from an investor’s viewpoint if fund managers were to target an absolute rather than a relative benchmark.

South African unit trust performance and strategy in a changing economic climate (1989–2002)

Previous studies show that interest rates, dividend yields and other commonly available variables are useful market indicators. Although this has produced new insights into asset pricing models, it has not been applied to the measurement of South African unit trust funds' performance. This study introduces a set of predetermined variables into the measures of performance of South African unit trust fund managers. Following Ferson and Schadt (1996), classical performance measures are modified to incorporate market indicators. The performance and strategy of seven South African general equity unit trust managers are evaluated over the period 1989 to 2002. The predetermined variables are both statistically and economically significant. It is concluded that when the conditional measures are applied to this sample of unit trusts, their performance improves. No evidence of market timing strategy is demonstrated under a conditional approach.

Consumer Reaction to Measures of Poor Quality: Evidence from the Mutual Fund Industry

U NLESS quality is apparent at the point of sale, the market must find ways to ensure the delivery of high-quality products; otherwise, producers have incentives to sell low-quality goods at high-quality prices, thereby assuring a degenerate equilibrium.1 Various solutions to this problem have been proposed, most revolving around bonding mechanisms.2 For bonds to work, however, consumers must react to the delivery of less-than-promised quality.3 In general, the faster consumers detect and react to delivery of low-quality products, the more efficient the market is in delivering high-quality products.4 Despite its prominence in the theoretical literature, direct evidence of consumer response to less-than-promised quality is rarely measured. This is a shortcoming presumably attributable to the difficulty of measuring both the difference between expected and actual product quality and