Published in Asia Asset Management June 2007
The future looks bright to Public Mutual. Malaysia’s largest private unit trust company sees significant room for growth in a country where the national savings rate exceeds 30 per cent.
According to Bank Negara Malaysia data, individual conventional fixed and savings deposits stood at RM285.6 billion as at end-March this year, while total Islamic demand deposits, investment deposits and savings deposits amounted to about RM26 billion.
Couple these savings with the low equity penetration rate of unit trust companies in Malaysia and there is a case to be optimistic. Whereas equity penetration of unit trust companies in developed markets, like the US, are over 40 per cent of total market capitalisation, Malaysia’s is at a meagre 14.35 per cent.
“Clearly, the market is largely untapped and the growth opportunity of the unit trust industry remain tremendous,” observed Lam Kam Yin, CEO of Public Mutual. “There is significant potential for Malaysians to mobilise their savings into unit trusts as they become more sophisticated and knowledgeable about investing their savings wisely.”
There are 38 fund management companies in Malaysia, according to the Securities Commission’s March 2007 data, with a total net asset value of funds of RM134.201 billion or 13.62 per cent of the country’s stock market capitalisation.
At the top of the heap is Public Mutual with a net asset value under management that has doubled from RM9.88 billion in December 2004 to more than RM20 billion in May 2007. As at 30 March this year, according to its internal data, Public Mutual held a 35.3 per cent of the market share in Malaysia’s private unit trust industry, with total NAV of funds managed by company standing at RM18.3 billion.
Just a month later, its marketshare had increased to 36.6 per cent and its total NAV had grown to RM 19.9 billion. For Public Mutual, this fast-tracked growth is an indication that it is doing something right.
As at 30 April 2007, 16 of its funds were Lipper Leaders, returning performances that were within the top 20 per cent of their respective peer groups. The company has garnered about 100 industry awards since 1999 making it the most awarded unit trust fund manager in Malaysia.
Public Mutual is a wholly-owned subsidiary of Public Bank, Malaysia’s third largest bank. The company began operations in 1981 when it launched its first fund, the Public Savings Fund. Today, Public Mutual manages 42 unit trust funds under four categories; equity fund, balanced fund, bond fund and money market fund, for over one million accountholders.
Continuing education is key to encouraging more people to buy unit trusts in Malaysia, the company says. “We put a lot of effort and resources into educating the general public by giving unit trust investment seminars and talks, contributing unit trust articles to various newspapers and setting up a unit trust learning centre on our website,” said Mr Lam.
Public Mutual promotes two sets of funds: the Public Series of Funds and the PB Series of funds. The Public series is marketed through an 18,000-strong agency force of independent unit trust consultants, the largest in the country which Public Mutual describes as “collectively the most productive in the entire private unit trust industry.”
These consultants are required to undergo a series of in-house training programmes that have been designed to equip them with product knowledge, selling techniques, key financial planning concepts and agency management skills.
In addition to continuous training, the agency force is supported by huge investments in information technology with sales tools such as Public Mutual’s Mutual CAMS, a database system that allows the consultants to access their client and agency data with a mouse click; and the Financial Freedom FP Advisor, a financial planning software assists with financial planning consultation, investment performance review and financial health check for clients and prospective investors.
Meanwhile, the PB Series of Funds, created specially for Public Bank, are promoted to Public Bank customers through the bank personnel at its 240 branches around the country.
Service charge for a typical equity fund, the Public Growth Fund, ranges between 5 and 7 per cent of NAV per unit while annual management fee for this fund is 1.5 per cent of NAV per annum and management expense ratio was 1.58 per cent for the financial year ended 31 July 2006.
The company’s offshore investments currently account for 16.7 per cent of its total AUM. It lauded Bank Negara’s recent decision to allow local unit trust firms to invest up to 50 per cent of the NAV of their funds in foreign currency assets, up from the previous 30 per cent.
“This upward revision in investable funds will enable more overseas funds to be launched to cater to the diverse investment needs of the investors,” said Mr Lam. “We are always looking in offering more regional and global funds to enable investors to continue diversifying their assets,” he added.
Several new regional and global funds, mostly equity funds, are in the pipeline. The unit trust company plans to launch at least 16 new funds this year. It has already launched 11; six PB funds and 5 Public funds.
In anticipation of the competition heating up should the Malaysian market be open to foreign domiciled unit trusts, Public Mutual believes that it will compete best by continuing to do what it is already doing, only better.
Mr Lam said that the company would continue to focus on achieving consistent investment returns over the long term for its unit holders, continue to introduce new products to complement and widen its existing range, continue to enhance customer service and continue to ensure that its unit trust consultants and bank distribution channel are well-trained.