Tuesday 14 June 2016

Investing into Morningstar's "5 STAR" Rated Unit Trust Funds

The present dilemma with Malaysia's unit trust industry is that most Malaysians believe in the concept of "bigger is better". Malaysian investors generally buy into the idea that a fund will be top performing if it is managed by a large and well known fund house.

This data from Morningstar clearly indicates that the Unit Trust market share is dominated by a few fund houses.

Malaysia Fund Houses Market Share as of April 2016
While there is nothing wrong investing into large or popular fund houses, I believe that an investor can get better returns by investing into funds that are highly rated instead. The term highly rated in this context comes from a system of STAR rating provided by a neutral fund tracking website called Morningstar.

What is Morningstar?
Morningstar is a non bias website which tracks the performance of all unit trust funds in Malaysia. Morningstar also rates and categorizes unit trust funds using its own STAR rating system introduced in 1985. The best performing funds will be rated with the maximum of 5 STARs.

What are Morningstar's 5 STAR Rated Funds?
Based on the data extracted from Morningstar as of 5th June 2016, there are only 28 funds with overall 5 STAR rating. The list of 28 funds are as shown below:

Fund Name
Category
RHB Smart Balanced
Blended - Balanced
RHB Growth & Income Focus
Blended - Balanced
RHB Dana Hazzem
Blended - Balanced (Syariah)
Apex Dana Al-Faiz-i Inc
Blended - Balanced (Syariah)
Dana Makmur Pheim
Blended - Balanced (Syariah)
RHB Smart Income
Blended - Conservative
AmDynamic Bond
Bonds - Malaysia
AmDynamic Sukuk
Bonds - Malaysia (Syariah)
RHB Islamic Bond
Bonds - Malaysia (Syariah)
CIMB-Principal Asia Pacific Dynamic Inc
Equity - Asia Pacific ex-Japan
Affin Hwang Select Asia (ex Jpn) Quantum
Equity - Asia Pacific ex-Japan
CIMB-Principal Global Titans
Equity - Global
CIMB-Principal Greater China Equity
Equity - Greater China
Eastspring Investments Equity Income
Equity - Malaysia Income
AMB Ethical Trust
Equity - Malaysia Large-cap
CIMB-Principal Equity
Equity - Malaysia Large-cap
Manulife Investment Regular Savings
Equity - Malaysia Large-cap
Public Ittikal Sequel
Equity - Malaysia Large-cap (Syariah)
Eastspring Investments Dana al-Ilham
Equity - Malaysia Large-cap (Syariah)
Eastspring Investments MY Focus
Equity - Malaysia Mid/Small-cap
Kenanga Growth
Equity - Malaysia Mid/Small-cap
Eastspring Investments Small-cap
Equity - Malaysia Mid/Small-cap
RHB Smart Treasure
Equity - Malaysia Mid/Small-cap
Manulife Investment Shariah Progress
Equity - Malaysia Mid/Small-cap (Syariah)
KAF Money Market
Money Market - Malaysia
RHB Cash Management
Money Market - Malaysia
Libra MoneyExtra Fund
Money Market - Malaysia
Libra Dana Safa
Money Market - Malaysia (Syariah)


Breakdown of 5 STAR rated funds according to Fund Houses
The table below indicates the breakdown of 5 STAR funds according to fund management companies.

Fund House
No of Funds
Percentage
RHB Asset Management Sdn Bhd
7
25.00%
Eastspring Investments Berhad
4
14.29%
CIMB Principal Asset Management Berhad
4
14.29%
AmFunds Management Berhad
2
7.14%
Manulife Asset Management Services Berhad
2
7.14%
Libra Invest Berhad
2
7.14%
Pheim Unit Trusts Berhad
1
3.57%
Amanah Mutual Berhad
1
3.57%
KAF Fund Management Sdn Bhd
1
3.57%
Public Mutual Berhad
1
3.57%
Kenanga Investors Berhad
1
3.57%
Apex Investment Services Bhd
1
3.57%
Affin Hwang Asset Management Berhad
1
3.57%


Percentage (%) of 5 STAR funds according to Fund Houses

By comparing the data above with the earlier data on market share by fund companies, it clearly shows that funds companies with top rated funds are being overlooked by Malaysian investors. For example, RHB Asset Management Sdn Bhd has seven "5 STAR" rated funds yet only has a meager market share of 4.83%!

On the other hand, Public Mutual Berhad with the biggest market share of 57.41% (and 97 funds under management) has only one "5 STAR" rated fund! As a matter of fact, if you look at the growth of  Public Mutual Berhad, the company has amazingly increase its market share from 56.67% in 2015 to 57.415 in 2016 despite not having many top performing funds.

The ignorance of Malaysian investors towards unit trust fund is the very reason why they are losing out on investing into funds that could provided better returns in the long run!

What are you losing out when you are not investing into these 5 STAR funds?
As mentioned earlier, Morningstar ratings are given according to the performance of each fund in terms of returns. A 5 STAR rated fund is normally one that is top performing in its respective category.

Now what I'm going to show you next are the annualized returns of these 28 funds in terms of 3 Yrs, 5 Yrs and 10 Yrs. Do take note that this is not a performance comparison between the 28 funds because each fund come from different categories with various risk level.

1) Fund performance in terms of 3 Yr Annualized Return


Fund Name
3 Yr Annualized Return (as of 2 June 16)
29.84%
YES
Eastspring Investments MY Focus
20.26%
YES
16.87%
YES
15.90%
YES
CIMB-Principal Global Titans
13.97%
NO
13.69%
YES
CIMB-Principal Greater China Equity
12.87%
NO
RHB Growth & Income Focus
12.30%
YES
Manulife Investment Shariah Progress
11.93%
NO
11.56%
YES
11.19%
YES
11.09%
YES
Eastspring Investments Equity Income
8.33%
YES
RHB Dana Hazzem
7.44%
YES
7.24%
YES
Manulife Investment Regular Savings
7.08%
NO
Affin Hwang Select Asia (ex Jpn) Quantum
6.70%
YES
RHB Islamic Bond
5.80%
YES
Apex Dana Al-Faiz-i Inc
5.62%
NO
AMB Ethical Trust
5.61%
YES
CIMB-Principal Equity
5.01%
NO
Public Ittikal Sequel
4.99%
NO
AmDynamic Sukuk
4.27%
YES
AmDynamic Bond
3.89%
YES
Libra Dana Safa
3.77%
NO
Libra MoneyExtra Fund
3.66%
NO
RHB Cash Management
3.49%
NO
KAF Money Market
3.36%
YES

2) Fund performance in terms of 5 Yr Annualized Return


Fund Name
5 Yr Annualized Return (as of 2 June 16)
17.08%
YES
15.69%
YES
Eastspring Investments MY Focus
14.01%
YES
Manulife Investment Shariah Progress
13.87%
NO
12.85%
YES
12.19%
YES
Affin Hwang Select Asia (ex Jpn) Quantum
11.79%
YES
11.58%
YES
Eastspring Investments Equity Income
11.38%
YES
11.04%
YES
RHB Growth & Income Focus
10.19%
YES
CIMB-Principal Global Titans
10.17%
NO
8.82%
YES
8.41%
YES
Manulife Investment Regular Savings
7.76%
NO
RHB Islamic Bond
7.68%
YES
CIMB-Principal Equity
7.00%
NO
AMB Ethical Trust
6.85%
YES
Apex Dana Al-Faiz-i Inc
6.36%
NO
CIMB-Principal Greater China Equity
5.98%
NO
AmDynamic Bond
5.57%
YES
Libra Dana Safa
3.63%
NO
Libra MoneyExtra Fund
3.53%
NO
KAF Money Market
3.37%
YES
RHB Cash Management
3.31%
NO

Note : 3 funds does not have a 5 Year performance track record yet. 


3) Fund performance in terms of 10 Yr Annualized Return

Fund Name
10 Yr Annualized Return (as of 2 June 16)
16.73%
YES
15.95%
YES
15.68%
YES
14.79%
YES
RHB Growth & Income Focus
13.96%
YES
Affin Hwang Select Asia (ex Jpn) Quantum
13.73%
YES
AMB Ethical Trust
13.12%
YES
CIMB-Principal Equity
13.01%
NO
13.01%
YES
Apex Dana Al-Faiz-i Inc
11.47%
NO
Eastspring Investments Equity Income
10.85%
YES
Manulife Investment Regular Savings
10.82%
NO
8.85%
YES
8.37%
YES
AmDynamic Bond
7.61%
YES
RHB Islamic Bond
6.17%
YES
CIMB-Principal Global Titans
4.07%
NO
Libra MoneyExtra Fund
3.33%
NO
Note : 10 funds does not have a 10 Year performance track record yet.

Summary
I must stress how important it is for every investor to include the Morningstar's star rating of a fund as a key criteria when it comes to selecting a fund to invest into. However the awareness about the use of star rating is extremely low among Malaysians investors. 

Only if you are an investor that diligently searches for information about unit trust investment would mostly likely discover the star ratings of funds via the Morningstar website. If you're the type that depends on an agent or consultant for advisory, chances are you would probably never heard about Morningstar rating. In addition, most fund fact sheets does not display the Morningstar's star rating because only a limited number of funds (28 only) has the bragging rights to show off their 5 STAR rating. 

Other funds have no reason to put the star rating because there is nothing to brag about. As a matter of fact, it could be counter productive for a fund to show off a 3 or 4 STAR rating which could possibly trigger an investor to ask is there a higher rated 5 STAR fund? 

After all that is said above, I feel that putting up a post on the list of unit trust funds with 5 STAR ratings is justifiable and in line with my personal goal of raising awareness among Malaysian unit trust investors. It is my believe that an investor should be given the right to access to non bias information about unit trust fund as well as make comparison between unit trust funds easily. If you're reading this post now, do share it with your family and friends. Help educate those that are yet to be "enlightened" with knowledge and resource. Give those that you care for the option to make wiser and better choices when it comes to investing into unit trust!

Cheers and happy investing!

P.S : 
  • Are you already invested into unit trust? Why not let me check for you how your funds compare against that of the 5 STAR rated ones. Just drop me an email at shanesee03@gmail.com if you like me to do a check for you!
  • 18 our of the 28 funds above can be invested online at very low sales charge. Find out how you can use eUnittrust to managed your own unit trust investment! Just click HERE
  • I've recently launched an online learning platform called Unit Trust Made Easy to help Malaysians to kick start their own unit trust investment. For further details, check it out HERE


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