Unit Trust Research Articles

Performance Evaluation of Islamic Unit Trust by Adapting Value at Risk: Some Evidence

Performance Evaluation of Islamic Unit Trust by Adapting Value at Risk: Some Evidence

DETERMINANTS THAT INFLUENCE THE ACTUAL BEHAVIOUR TO INVEST IN UNIT TRUST FUNDS: AN ANALYSIS OF THE ATTRIBUTES OF THE SALESPERSON

Despite the inherent and much-publicised benefits of investing in unit trust funds, not everyone is investing in them. Investing in unit trust funds, which is open to everyone, offers the investor, at low risks, returns which are potentially higher than those of savings, fixed deposit or even Employees Provident Fund. The relatively higher returns from unit trust investments could help the investor secure a more financially sound future, especially when it comes to his or her retirement. Based on observations, given the same socio-economic backgrounds, some people are more willing to invest in unit trust funds compared to others. Many probable factors are influencing a person’s decision to invest in unit trust funds. Using the Theory of Planned Behaviour and Trait Theory, this study aims to identify and examine those factors, especially the role of the salesperson, which can influence the intention to invest in unit trust funds, thus contributing to the body of knowledge about the Theory of Planned Behaviour in this regards. It is hoped that the findings of this study could help unit trust companies and other relevant parties design a more effective approach in encouraging more Malaysians to invest in unit trust funds and help them secure a more financially sound future. Data will be collected through a questionnaire by way of purposive sampling. Based on Cochran’s formula, 500 questionnaires will be distributed throughout Sabah, the sample population. The Independent Variables identified are attitude, subjective norm, a salesperson’s attributes and perceived behavioural control while the dependent variable is behaviour to invest in the unit trust. A pilot study on the questionnaire, which has been converted into Google form, had been distributed. A total of 44 complete questionnaires were considered for analysis, following which all the questions contained in the questionnaire passed the Cronbach’s Alpha Test for reliability.

Risk Profiling and Investment Instruments among Youth in Malaysia

The investment instruments in a financial market can be in various form such as common stocks (shares in a stock exchange), unit trust (government-backed and private) and money market instruments. Each of these instruments has their own risk characteristics that require a sufficient level of understanding on the risk tolerance level that people do not always comprehend. It is argued that only after the understanding of one’s risk profile an individual will be ready to invest optimally. This is because the misunderstanding of the risk tolerance level will result in mismatching between risk profile and the type of instruments hence increasing the chances of losses in investment. Thus, it is crucial for potential investors to understand their risk profile before they can even select for any of the instruments to invest. In order to resolve the above issue, this study is developed to facilitate individuals to recognize the amount of risk that they can absorb in order to help them identify the suitable types of investment instruments to participate in. In other words, this study aims to propose a conceptual framework to facilitate individuals in identifying their risk profile before embarking in any types of investments. This study will broaden the scope of literature in this area by providing evidence on Malaysian environment exclusively from the perspective of generation Y and Z.

Paper Series IV(A) – Company’s Securities: Shares, Share Capital and Shares Transactions

Paper Series IV is the centrepiece of this Paper Series that evaluate the new Companies and Allied Matters Act 2020 and its innovations and the implications they have for corporate finance and securities transactions, given that it considers company’s securities, which are the financial instruments traded or exchanged or hedged in virtually all finance and securities transactions. Company’s securities are the basis or the foundation of every company with shares. Securities include shares, debentures, debenture stock, bonds, notes (other than promissory notes) and units under a unit trust scheme. This Paper Series IV(A) discusses Company’s Securities, particularly in respect of shares, share capital, disclosure of person with significant control and shares transactions.

Fund Size and Performance of Unit Trust Funds in Kenya

When investors take part in any investment, the main objective is to increase their wealth. This is achieved when share prices increase. The performance of unit trusts in Kenya has however been poor compared to the counterparts in the rest of the world. The poor performance is a discouragement to individual and corporate investors in addition to affecting the realisation of financial stability according to the Kenya vision 2030. Empirical literature from developed and emerging markets posits that fund size explain the performance of unit trust funds. This study therefore investigated the effects of fund size on the performance of unit trust funds in Kenya. The study adopted an explanatory research design and positivism philosophy. The target population was 16 unit trust firms in Kenya as at the end of the year 2017. The study used a census approach. Secondary data was collected from the audited financial statement of respective unit trusts for the period 2005 to 2017 using a data collection schedule. The study established that fund size has significant positive effect on performance in all funds. The study concluded that increase in fund size increases performance. The study recommends that capital market authority should monitor performance of unit trusts constantly and in addition develop merger policies to encourage small unit trust to merge in order to take advantage of economies of scale.

INVESTMENT DECISION MAKING TOWARDS INVESTING IN ISLAMIC UNIT TRUSTS AMONGST WOMEN

The differences in skill expectations and knowledge are amongst factors that contribute to the variances when men and women choose financial products. Women are claimed to be risk averse, somewhat insecure, lacking self-confidence and interest in financial investment products. Nevertheless, the evolving working and educational environment has changed this stereotype, wherein women are increasingly more educated, knowledgeable, and are more exposed to investments. Gender equality between men and women in terms of the volume of investments has turned into a requirement that boosts economic growth with people being the most important factor to contribute through investing habit. This cannot be realised if only men are involved in investment. Financial institutions aim certain figures of targeted investment volume each year. As such, this study identified the factors of women investments, particularly in Islamic unit trusts. A total of 201 respondents were selected via the convenience sampling technique. The Likert scale questionnaires were analysed using SMART PLS software. As a result, several investment behaviours, including investment objectives, return expectations, awareness, and risk attitude, emerged as factors that influenced women investors to choose unit trusts. The study outcomes are beneficial in devising effective strategies that may attract women to invest in Islamic unit trust. Besides, certain agencies should conduct campaigns or seminars on financial literacy for this potential sector, so as to enhance their knowledge in investing in Islamic unit trusts.

A comparative analysis of Islamic unit trust portfolio using value at risk methodologies

Islamic unit trust is a sunrise industry in the Malaysian capital market over the last decades to fulfill the demand from its Muslim investors. Muslim investors are only willing to invest their capital if the investment does not conflict with their religious beliefs, namely Islam. Previously, most of the studies focused to evaluate the performance of unit trust funds relative to the market as a whole. Meanwhile, it is also important for investors to accurately measure their downside risk because it is closely related to their future losses. Thus, Value at Risk (VaR) concept was introduced to calculate monthly risk for an Islamic unit trust portfolio using the three standard approaches which are Delta Normal, Historical Simulation and Monte Carlo Simulation. Results show that Monte Carlo Simulation is the best method to quantify risk exposure as the average Mean Absolute Percentage Error (MAPE) is the lowest compared to the other two methods. The findings also highlight the importance of embedding risk into investment analyses and provide insights to investors who are considering Shariah-compliant equity funds as a potential income-generating instrument. Therefore, financial consultants or fund managers can make informed decisions in setting up a well-diversified unit trust fund’s portfolio for their Muslim investors by applying the concept of VaR and its methodologies.

The increasing popularity of private funds

PurposeTo introduce the various private fund structuring options available in Singapore, an important fund management hub that has increasingly also come to be recognized as a popular fund domicile with its pro-business environment, transparent and robust regulatory regime and government support through tailored investment structures, tax incentives and extensive double taxation treaties.Design/methodology/approachThis article provides an overview of the available private fund structures as well as the key legal issues and considerations that fund managers and investors should take into account when structuring a private fund. It also provides a brief summary of the available tax incentive schemes for funds in Singapore.FindingsWith growth in private market assets under management fueled by private equity funds over the last decade, the use of private investment funds established in Singapore has become a popular means to tap the large capital inflows into Asia. Singapore offers a wide range of fund structures to suit different fund strategies and considerations, including the variable capital company (“VCC”) structure, a legal structure tailored for use as investment funds that was introduced in January 2020.Practical implicationsThere are a range of Singapore private fund structures available with different features, including the VCC, which is a corporate structure that allows for umbrella-sub-fund structures with segregated assets and liabilities, and the limited partnership, which is familiar to international investors and permits a large degree of contractual flexibility. Other structures such as unit trusts and private companies may also be suitable depending on the particular circumstances and objectives of the fund. Fund managers who are exploring setting up fund vehicles to tap Asian capital or to invest in Asia should be aware of the possible options, and their pros and cons.Originality/valuePractical analysis and guidance and market commentary from experienced investment funds lawyers.

Novel Fuzzy Multi-Attribute Decision Making Method for the Selection of Open Unit Trusts Under Uncertainty

Investment decision making is a complex process. Important decision concerns the (pre)selection of potential investment instruments to compose an investment portfolio. Conscientious selection involves the application of quantitative multi-criteria procedures. The typical element of uncertainty (i.e. unstable return or investor’s vague preferences about the criteria importance) must be considered. This combination of the typical characteristics of investment on the capital market can be addressed by means of fuzzy multi-attribute decision making methods. These methods effectively quantify the vague elements by using fuzzy numbers. However, the applicability of a relevant method sufficiently depends on the actual investment decision making problem. This article focuses on open unit trusts because this market is recently becoming more popular in the Czech Republic. Unfortunately, under all the practical and theoretical specifics of this type of investment, there is no known evaluation method that can satisfactorily solved this problem. Therefore, the main aim of this article is to propose a novel fuzzy multi-attribute decision making method that works for all investment conditions. Its algorithm is inspired by some principles of the outranking methods. The evaluation of open unit trusts offered by the Česká spořitelna, clearly demonstrates all of the benefits of the proposed concept compared to the existing methods.

Effects of Asset Allocation on Financial Performance of Unit Trust Schemes in Kenya

Abstract Unit Trust Schemes provide diversification, liquidity, professional management among other benefits. In order to diversify the funds raised from various unit holders, fund managers adopt a criterion with which funds are allocated optimally. A descriptive research design was adopted, and the study period was 5-years. The ratio of the composition of different asset classes to the fund value was used as the independent variables. Fund age was used as the control variable. Sharpe ratio was used to measure investment returns and that represented the dependent variable of the study. Data was collected from secondary sources and a multiple linear regression model was adopted to assess the association of the variables. Collected data showed normality traits, positive autocorrelation when measured using Pearson correlation coefficients. The data also showed mixed results for multicollinearity tests. The weight of money market instruments, corporate bonds, treasury bonds and equity significantly affected performance of Unit Trust Scheme funds. They all had probability values in the interval of 0 and 0.05. Therefore, the study concluded that asset allocation significantly affects how a fund will perform. Other factors such as timing, manager experience and prevailing economic conditions have to be considered when evaluating performance of a fund. Keywords: Asset allocation, Financial performance, Unit trust schemes, Kenya.

New complex fuzzy multiple objective programming procedure for a portfolio making under uncertainty

This article deals with a still current decision making problem — where to invest and how much. A few “tools” can help to answer this question, namely fundamental, technical or psychological analysis. “Soft” aspects as a human intuition or mood on the capital market can also play a nonnegligible role. These approaches and techniques (mainly individually) provide a partial information on investment reality. In practice, an investment decision, or portfolio, is mostly made just based on such a limited information. Moreover, the assets’ shares in the portfolio must be implicitly added up. This “crumbled” approach may not be an expected support to make a satisfactory investment decision. Therefore, a complex decision making procedure is practically designed. It is based on the fuzzy multiple objective programming method whose unique algorithm, working with triangular fuzzy numbers, is proposed in this article. Although these methods of decision making theory are not widely used on the capital market, they can be very convenient. The developed approach enables multiple objectives to be simultaneously accepted, as well as vague information about the assets or vague investor preferences. Moreover, a valuable output of this multi-factor procedure is an explicit quantification of the assets’ share in the portfolio. The ability to include all these aspects, which plays a significant role in a decision making on the capital market, proves a strong application power (and advantage over the mentioned concepts) to make an investment portfolio satisfactorily. This strength is demonstrated on the Czech capital market with open unit trusts offered by Česká spořitelna. Based on the specified investment strategy, the satisfactory investment portfolio consisting of four open unit trusts is effectively made.

Determinants of Public Trust towards Unit Trust Investment: A Study Using PLS-SEM

There are many types of investment exist in our world. People can choose where to invest their money based on the risk that they are willing to take. There is investment with low risk, medium risk and high risk. Unit trust is classified as medium risk investment. This research will focus on the biggest company in Malaysia that offer unit trust investment to public which is Permodalan Nasional Berhad (PNB) and it wholly subsidiary company, Amanah Saham Nasional Berhad (ASNB). It will focus on finding the determinants to build a trust from public to inves t in unit trust. Company strong brand name, word of mouth and effective promotional strategies have been chosen as the independent variables. Primary data will be use in this research in the form of distributing questionnaires and the data will be analysed with the help of Statistical Package for Social Science (SPSS). The findings have shown that all three independent variables have an effect on the dependent variable namely public trust. Using the regression analysis, the most significant independent variable is company strong brand name.

Analysis of the Acceptance of Newly Constructed Mathematical Model for Islamic Unit Trust among Public

A new mathematical model for Islamic unit trust fund was constructed based on the Integration model and the gaps discovered from existing model of Islamic unit trust in Malaysia. The gaps are payment of zakat/tax and additional benefit for investors. The aim of this study is to investigate the acceptance of public on this new constructed mathematical model. A total of 150 respondents were chosen among investors from Terengganu which has at least one unit of Islamic unit trust fund in Malaysia. The questionnaires distributed consist of four variables, where three were independent variables and one was dependent variable and analysed by using Statistical Package for the Social Science (SPSS). By using a Spearman’s correlation, it is found that each independent variable has moderate and strong correlation with the single variable. This can be concluded that the public has accepted this new constructed mathematical model. This study suggested that this new mathematical model is implemented by Islamic unit trust management in Malaysia and also, for investors to choose the Islamic unit trust which offer more benefits.

International experience of legal regulation of joint investment institutions

This article defines the essence of collective investment institutions, analyses the experience of joint investment institutions in various countries. It is marked that the effectiveness of the activities of mutual investment institutions depends directly on the legal regulation of their activities, the establishment of a clear legal regime of activity of investment funds and companies in the securities market. Given the evolution of legal regulation of co-investment institutions in Ukraine, the experience of other countries in this field is interesting and useful. The formation of separate national markets for joint venture investment services took place under completely different historical conditions, under different legal regimes and types of financial systems. The analysis of the activities of joint venture institutions abroad shows that there are different models of joint venture institutions. If in the US the most popular way of investing is to buy shares of mutual funds (or open-end in-vestment companies) and, in addition, to close closed-end investment companies, in the UK, the former were the so-called unit trusts (or unit trusts), and the second - investment funds. The investment sphere of the German economy is very specific in comparison with other countries. This is due to the special role of the banks that they play in it. It is worth noting that the positive factors of legal regulation become effective only if an effective system of joint investment institutions and a favorable investment climate in the country are created. It is important to ensure state support for existing and newly created joint investment institutions, especially in the field of introducing the most preferential taxation system. Third, the creation of conditions that would encourage individual investors to participate in the investment fund. First of all, it is about creating mech-anisms for guaranteeing the rights of participants of joint investment institutions.

CSR Disclosure, Corporate Governance and Firm Value: a study on GCC Islamic Banks

PurposeThis study aims to explore the corporate social responsibility disclosure (CSRD) practices of the Islamic banks in the Gulf Cooperation Council (GCC) countries during the period 2010-2014 and examines the determinants of CSRD and its effects on firm value.Design/methodology/approachBased on the Accounting and Auditing Organization for Islamic Financial Institutions Governance Standard No. 7 guidelines and using content analysis, the paper develops a comprehensive CSRD index for GCC Islamic banks. The study applies ordinary least squares regression analysis for hypothesis testing and for finding determinants of respective dependent variables.FindingsThe results show a very low level of CSRD among the sample Islamic banks in GCC countries. When using corporate governance characteristics to examine the determinants of CSRD, this study provides evidence of a significant positive association between board size and CSRD practice in Islamic banks and a significant negative relationship of chief executive officer (CEO) duality with CSRD, as per expectation. For the economic consequences of CSRD, the study documents an inverse performance effect of CSRD while board size, board composition and CEO duality indicate significant positive effects on firm value.Research limitations/implicationsThe relatively small sample size of GCC Islamic banks may limit the application of the findings to other Islamic financial institutions such as Takaful and the Islamic unit trust company.Practical implicationsThe findings of this study initiate the global debate on the need for corporate governance reform in Islamic banks by providing insights on the role played by corporate governance mechanisms in encouraging and enhancing CSRD practices among Islamic banks. The findings also have important implications for investors, managers, regulatory bodies, policymakers and Islamic banks in the GCC countries.Social implicationsThe results of the study do not support the idea that Islamic banks operating on Islamic principles can meet their social responsibilities through promoting corporate social responsibility (CSR) activities and by differentiating themselves from non-Islamic banks.Originality/valueThis is the first study to examine the determinants of CSRD in GCC Islamic banks using comprehensive CSRD and corporate governance variables and, therefore, adds value to the existing CSR literature in banking.

ISLAMIC STOCK MARKET BEHAVIOR TOWARD CHANGES IN MACROECONOMIC VARIABLES

This study was conducted to assess the behaviour of the Islamic stock market towards the changes in the economic indicators in Malaysia. The variables involved were the FTSE Bursa Malaysia Emas Shariah Index (FBMES) which was a proxy to the Islamic Stock Market. The independent variables used were the Consumer Price Index (CPI), Islamic Banking Interbank Rate (IIR), Money Supply (M3) Islamic Unit Trust (IUT) and the Industrial Production Index (IPI).This study utilized the standard Vector Autoregressive (VAR) estimation model with monthly data from January 2007 to December 2017. The findings showed that there was a long-term relationship between Islamic stock market with the Islamic unit trust and the industrial production index. Based on the test results of the Vector Error Correction Model (VECM), the Islamic stock market was not influenced by any of the selected macroeconomic variables. However, the study found that the FBMES variables were significant in shaping the Granger's short-term impact on changes in Islamic interbank rate (IIR) and money supply (M3) variables. As such, this study proved that the Islamic stock market index and the macroeconomic variables could influence one another.

The Role of Ownership and Capital Structure on Compliance: The Case of Regulatory Changes for Shariah Screening Methodology

In this study, we examine the impact of regulatory changes in Shariah screening guidelines as introduced by the Financial Services Act 2013 in Malaysia. The adoption of new regulations for Shariah-screening methodology affects the Shariah-compliance status of firms resulting in a considerable number of firms who either become non-compliant and removed from the list of Shariah-compliant firms or switched to Shariah-compliant. We investigate underlying determinants that governed such a switching behavior including the capital structure and ownership structure. Our results after controlling for size and financial performance indicate that financial leverage and owners’ equity play a key role in explaining the switching behavior of Shariah firms. We also found that ownership structure plays a vital role in a firm’s decision to stay Shariah-compliant. Specifically, shares held by institutional investors (unit trust, endowment funds) and individual/family play an essential role for firms to stay Shariah-compliant. The empirical findings suggest that demand for Shariah-compliant investment in Malaysia emerges from the smaller investors investing in mutual funds/unit trust and overall composition of the population.

Disclosure Practices Among Unit Trust Funds in Malaysia

This study examined the level of transparency among unit trust funds in Malaysia. Unit trust funds were the focus of this study due to its nature: unique, heavily regulated and rapidly growing. The study investigated the extent of disclosure in relation to the various mandatory and voluntary requirements and the roles of the specific characteristics of trust funds in explaining their level of disclosure in the annual reports. The findings showed that the level of disclosure increased rapidly within the period of study suggesting that trust funds were becoming more transparent. With regard to the funds' specific characteristics, the study showed that the influence was not consistent. The model best explained the disclosure level during the pre-mandatory period, i.e. 1996. During this year, the variables 'sponsor of the fund' and 'auditors' significantly influenced the disclosure level in the predicted direction. In the other years (1997 and 1998), the explanatory power of the model was very low as suggested by the significant reduction in the adjusted R2. One argument was that during this period, the revised Guidelines had been issued and thus the model could not explain much the variation in the disclosure level as a large amount of the items in the study were already mandated.

Judicial Fallibility & the Common Man – II: Statutory Body Over Rules Parliament & Courts Refuse to Take Notice.

SEBI a statutory body created by an Act of the Parliament of India - Securities and Exchange Board of India Act, 1992 approves termination of Senior Citizen Unit Plan, 1993 in 2008 without complying with the mandate of the Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002 - i.e. complying with the provisions of Securities and Exchange Board of India ( Mutual Fund) Regulations, 1996 thereby undermining the authority of the Parliament to legislate reform. And the Courts refuse to take cognisance.

A Comparative Analysis of Fixed Income Unit Trust Funds versus Equity Unit Trust Funds in Malaysia

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.