19-06-1, 6th Floor, PNB Damansara,

19, Lorong Dungun, Damansara Heights,

UNIT TRUST
GUIDEBOOK
50490 Kuala Lumpur, Malaysia.
Tel: +603 2093 2600, Fax: +603 2093 2700
www.fimm.com.my
 INVESTING
IN UNIT TRUSTS:
A Practical Introduction
This guide is designed for new investors who are looking to invest in
unit trusts. The contents of this guide aim to provide an overall view
of unit trusts and it does not contain all advice or information on the
subject matter. The examples provided in this guide are meant for
illustrative purposes only and reflect the market conditions at a
specified point in time, which may lapse and affect its relevance. If
in doubt, you are strongly recommended to seek professional
advice. For more information, please visit our website at
www.fimm.com.my.
 Table of Contents
SECTION 1: What are investments? 3
SECTION 1:
The difference between savings and investments
SECTION 2: What are unit trusts?
4
7 What are investments?
Types of funds and their profiles 10
Identifying types of funds 11 An investment is a commitment of funds to one or more assets that
will be held over some future time period, in the hope that it will
SECTION 3: Why Invest in unit trusts? 13 generate more income. Unit trust funds are a type of investment
and offer potentially lucrative returns. This guide by the Federation
Benefits of investing in unit trusts 14 of Investment Managers Malaysia (FIMM) provides a clear overview
How do I invest in unit trust funds? 15 of investing, particularly in unit trust investments.

Distribution channels for unit trust funds 16

Frequently Asked Questions (FAQs) 17

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 SECTION 1

The difference between savings and investments Table 1 shows that savings and investments have different characteristics that
can help you gain financial independence. Ideally, a healthy financial portfolio
Savings and investments are related but fundamentally different financial contains both savings and investments to support your goals at different
instruments. While the primary aim of savings is to protect the real value of stages in life.
money you put away, investments aim to grow its value. The table below
highlights some of the key differences between the two. For example, it is always good to have some money in savings in case of
unexpected emergencies such as medical bills or repairs to your home. But
you should also have some money invested to grow over time to pay off loans
or in preparation for your retirement, child’s education or other future expenses.
SAVINGS INVESTMENTS
Some investments such as shares or equities are considered to be among the
• Keeps the value of • Grows the value of riskiest assets as they depend on a wide variety of variables, including market
PROS:

money saved intact your money conditions, economic conditions, effectiveness of the company’s management
• May provide small returns as • May return several times and government regulations. The relative risk spectrum of investment assets is
determined by interest rates the amount of your initial given in the diagram below:
• Always available when investment
you need it • Helps you build a nest egg
• Risk is minimal and usually for your retirement, children’s RISK OF SAVINGS AND INVESTMENT
guaranteed by banks or by education fund, etc.
the government • Value of investment tends to
• Requires little financial correlate to inflation LESS VERY
knowledge RISKY RISKY

Savings Government Property Unit Market Financial

• Little increase in value • Risk level varies but generally
CONS:

Accounts, issued Trust traded derivatives

over time higher than savings Fixed bonds funds shares, (e.g., swaps,
Deposits and commodities CDS)
• Inflation may significantly • Money usually locked in for a securities (variable)
diminish value predetermined period of time
• Not completely risk-free • Requires investors to
understand the product and The diagram above provides a snapshot of some of the more common
the market investments and their relative level of risk. Although the risk profile of each
individual asset may not fall neatly into the common categories above, the
diagram provides a general guide for investors.
• Savings Accounts • Equities (shares in company)
EXAMPLES:

• Fixed Deposits • Bonds

• Property
• Unit Trusts

Table 1

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SECTION 1 SECTION 2

The Risk/Reward Trade-Off

Riskier investments tend to offer higher returns, but with the possibility they
may fail and not provide any returns at all. Less risky investments are more
dependable and predictable, but generally offer lower returns.

Be aware of your risk tolerance level and ensure that your investments are
evenly distributed across various types of investment assets!

SECTION 2:
What are unit trusts?
DID YOU KNOW…
• Banks use your money to provide loans and in return distribute a portion of
their profits in the form of interest on your savings?
• Savings schemes, including Fixed Deposits, return an interest that is only
slightly higher than the forecasted rise in the cost of living—otherwise known
as inflation—to ensure that the value of your savings does not diminish? Unit Trusts in a Nutshell
Unit Trusts are a form of collective investments that allow investors
with similar investment objectives to pool their savings, which are
then invested in a portfolio of shares or other assets managed by
professional fund managers

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 SECTION 2

Depending on the type of fund, the fund manager might invest in the following
types of assets: UNIT
HOLDERS
• Bonds
• Stocks Invest by buying
• Derivatives units in the fund
• Money market instruments
• Cash

The operation of a unit trust fund is governed by a deed—a document that sets UNIT TRUST
out the obligations of the trustee and Unit Trust Management Company FUND
Safeguards Manages the
(UTMC), including the details of how the unit trust fund is to operate. the assets of operations of
the unit trust unit trust
The fund manager from the Unit Trust Management Company manages the
fund by making investment decisions, while the fund trustee functions as the

INCOME DISTRIBUTION
FUND
overseer of the Unit Trust Management Company. The trustee also acts as the
TRUSTEE MANAGER/

CAPITAL GAIN
custodian of the fund’s assets and protects unit holders’ interest by ensuring
that the manager follows regulatory requirements as set out in the deed. UTMC

If all goes well, the fund’s assets earn returns, which are reflected in the fund’s Fund is invested
in authorised investments
Net Asset Value (NAV). The NAV appreciates or depreciates based on the as specified in the deed
performance of the fund.

AUTHORISED
INVESTMENTS
• Bonds
• Stocks
• Derivatives
• Money Markets
• Cash

RETURNS

**Figure 2: How Unit Trusts Work

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 SECTION 2

Unit Trust funds are usually provided by financial institutions such as Unit BALANCED FUNDS
Trust Management Companies (UTMCs). UTMCs are authorised to issue or Some investors may wish to invest in all the major asset classes to reduce the
offer for purchase of units of a unit trust scheme as defined in Sub-section 2(1) risks or shortcomings associated with investing in any single asset class. A
of the Capital Markets and Services Act 2007. balanced unit trust fund generally has a portfolio comprising equities,
fixed-income securities and cash.
UTMCs offer many types of unit trust funds, which differ from each other in
terms of investment objectives, risks and rewards. SHARIAH FUNDS
The main objective of Shariah or Islamic funds is to provide an alternative
avenue for investors whom are sensitive to Shariah requirements. Shariah
Types of funds and their profiles funds exclude those companies involved in activities, products or services
related to conventional banking, insurance and financial services, gambling,
alcoholic beverages and non-halal food products. Though Shariah funds are
EQUITY FUNDS designed to serve Muslim investors, non-Muslim investors can also invest in
Equity funds are the most common type of unit trusts. Generally, a major Shariah funds.
portion of its assets is held in equities or securities of listed companies. Equity
funds are popular in Malaysia as they provide investors with access to the
companies listed on Bursa Malaysia. Accordingly, the performance of the units Identifying types of funds
is linked to the performance of Bursa Malaysia: a rising market normally
correlates to an increase in the value of the unit, and a falling market normally All Unit Trust Management Companies are legally required to issue a
correlates to a decrease in its value. prospectus and you are advised to read the prospectus to identify the type of
fund that best suits your investment goals.
FIXED-INCOME FUNDS
Fixed-Income funds are mainly invested in Malaysian Government Securities, A Unit Trust Prospectus is a document that describes a fund for potential
corporate bonds, and money market instruments such as bankers’ acceptance investors. It tells you how and what the fund will invest in, its potential risk and
and fixed deposits. The objective of a Fixed-Income fund (or bond) is to other material information such as the fund’s Net Asset Value (NAV). NAV is the
provide regular income with less emphasis on producing capital growth. It is total value of the fund. It is generally calculated daily and reflected in the
possible, however, for Fixed-Income funds to generate both capital gains and per-unit price of the fund.
losses during periods of volatile interest rates.

MONEY MARKET FUNDS

Money market funds operate in a similar way to savings accounts in that the
unit price is normally fixed. Money market funds invest in short-term
government securities and in low-risk money market instruments that in effect
operate as short-term deposits (loans) to banks and other low-risk financial
institutions.

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SECTION 2 SECTION 3

EXAMPLE: Importance of prospectus

XYZ Bhd is Unit Trust Management Company and has launched a fund
called the “XYZ Growth Fund”. In this case, judging by its name, we may
perceive it as a growth fund.

However, by viewing the “XYZ Growth Fund” prospectus, we discovered

that it is an equity fund which invests 75% to 98% of the fund’s net
asset value (NAV) in equities. In this case, the name of a fund did not give
us the information to identify the fund type.

Since it is an equity fund, we should recognise that it is a riskier

investment, and this is confirmed on the XYZ’s website which rates the
fund’s risk level as 4 out of 5 (where 1 is low and 5 is high).

DID YOU KNOW…

SECTION 3:
• As a unit trust holder you do not own the assets purchased by the fund directly.
However, you do hold direct ownership of the fund.
Why invest in unit trusts?
• The return of investment in unit trust funds is usually in the form of income d
istribution and capital appreciation.
• Each unit held returns an equal amount, so the more units you hold the more
you will receive if the fund distributes income.
• Unit trusts offer investors access to assets otherwise not normally available
to them.
• In the short-term, the certainty of investment returns in most unit trust funds is
less than that offered by fixed deposits. However, in the medium- to long-term
(i.e., 3 to 20 years), unit trust investments generally provide better returns at
levels of risk acceptable to most investors.

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 SECTION 3

Benefits of investing in Unit Trusts How do I invest in Unit Trust Funds?

Investing in unit trusts is a personal process. Depending on several
• Portfolio Diversification factors—including your risk appetite and tolerance for risk (known as your
Unit Trust investments allow the investor to invest in a broader range of risk profile), investment goals and investment timeline—you may find that
securities than they would be able to when investing on their own. some unit trust funds are more suitable than others.
Diversification minimises exposure to any one type of risk.

• Asset Liquidity
There is an ease in selling and buying units as compared with investing
directly in shares of companies where prices and opportunities to transact Some questions to consider before investing in Unit Trust funds:
depend on the availability of both buyers and sellers. 1. What is your risk profile?
2. What are your goals in undertaking this investment?
• Continuous Professional Management 3. Does your investment strategy align with the fund’s goals?
Unit trust funds are managed by professional and full-time fund managers 4. What is your investment timeline?
who have the necessary skills, relevant experience and dedicated resources 5. Do you understand the potential risk of investing in the fund?
to maximise investments. This takes the worry out of the day-to-day 6. Are you aware of the types and amounts of fees such as sales charges, exit
decision whether to buy or sell an a financial asset – the fund manager does fees, switching fees and annual management charges?
it all for you.

• Access to Broader Array of Financial Assets Important: Unit Trusts are not suitable for short-term investors who are
Fund managers can trade in investment products normally inaccessible to looking to cash out within a year’s time. It is also not suitable for speculators
the individual investor, such as government and corporate bonds. With unit looking to make quick returns.
trust funds, an individual investor can enjoy the benefits of these investment
products with a small capital outlay. Unit Trust investments are best suited to investors looking to invest over the
medium to long-term. Though some financial knowledge is necessary and
• Tax Benefits helpful, careful and attentive investors will be able to learn the basics of unit
Capital profits are tax-free. trust investing from their Unit Trust Consultant.

• Affordability
Unit trust investments require only a minimal capital outlay as most funds
accept both small and large investments, making it affordable for the average
investor to get started.

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SECTION 3 FREQUENTLY ASKED QUESTIONS

When you have decided to invest in unit trust funds, your unit trust consultant FREQUENTLY ASKED QUESTIONS (FAQs)
(UTC) will ask you a series of questions to help you make suitable and informed
investment decisions. 1. Are Unit Trusts risk-free?
No. However, the risk is lower as compared with other investment
The questions will determine your investment goals, investment horizon and instruments because unit trusts are based on diversification, and risk is
risk appetite amongst others. Generally, the higher your appetite for risk, the reduced through the purchase of a wide array of different assets.
better prepared you are to invest in riskier funds.
2. Why shouldn’t I put all my money in a growth fund?
As an informed investor, you should also understand the types of fees involved Your choice of funds depends on a number of factors:
and your rights and responsibilities as a unit holder. • Your current life stage
• Your level of savings and income
• Your risk tolerance
Distribution channels for Unit Trust Funds • Your investment goals
• Your investment timeline
The distribution channels for the marketing and distribution of unit trust
funds comprise: If you are young and do not need quick access to your money, a growth
fund may be your best choice since it has time to grow and increase the
1. Unit Trust Management companies (UTMC) value of your investment. If you generally prefer investments with lower risk,
UTMC markets and distributes its own products. a growth fund might not be right for you as there is a chance you may panic
and sell the units should the market take a turn for the worse.
2. Institutional Unit Trust Advisers (IUTA)
IUTA distributes unit trust products of multiple UTMC according to its 3. There are so many funds out there. How do I choose the right one?
distribution agreement. You should consider a number of factors before you decide to invest in any
one fund:
3. Corporate Unit Trust Advisers (CUTA) • Whether the UTMC is registered with the Securities Commission Malaysia
CUTA distributes unit trust products of multiple UTMC according to its • Whether the fund fits your risk and investment profile
distribution agreement. • Whether the fund is approved by Securities Commission Malaysia

4. Unit Trust Consultants (UTC) The list of approved funds is available at www.fimm.com.my. You should
Individuals who have passed Computerised Unit Trust Examination (CUTE) also review the fund’s past performance before investing in the chosen fund.
by FIMM and are attached to either one: UTMC, IUTA or CUTA.
Reminder: Past performance should not be relied upon to predict the
All members, distributors and consultants must be registered with FIMM to be future performance of the fund.
authorised to market and distribute unit trust.
4. Can I change my mind after investing?
Yes, there is a six-day reconsideration period (also known as “cooling off
period”) for first time investors. Should you change your mind about your
investment and withdraw your application within this timeframe you, are
entitled to a full refund of your application money.

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FREQUENTLY ASKED QUESTIONS

5. I’ve heard that I can invest some of my Employee Provident Fund (EPF)
savings into Unit Trusts. Is this true?
Yes. Eligible EPF members with savings above the Basic Savings prescribed
by EPF are allowed to participate in Members Investment Scheme and
invest in unit trusts approved by EPF.

For more information about investing your EPF savings in approved unit
trust funds, visit FIMM’s website at www.fimm.com.my.

6. How do I know that my UTC is giving me the best advice possible?

What are my options if I am not happy with the service I am getting?
UTC will give you the best advice by recommending investment that best
suit your investment objective and risk profile. If you are dissatisfied with the
service you have received from your UTC you should contact FIMM’s
complaints bureau.

Once a complaint is received, FIMM will conduct investigations, hold

hearings and impose penalties if the need arises. The availability of a
structured channel to handle complaints and safeguard investors’ interests
provides added confidence to the investing community.

Any complaints on the improper conduct and other irregularities involving

FIMM members, distributors and UTCs should be directed to:

Legal Secretarial & Regulatory Affairs

Federation of Investment Managers Malaysia (FIMM)
19-06-1, 6th Floor, PNB Damansara, 19 Lorong Dungun
Damansara Heights, 50490 Kuala Lumpur
Tel : 03 – 2092 3800 (Direct Line to Complaints Bureau)
Fax : 03 – 2093 2700
Email : [email protected]

Accurate and adequate information on the nature of complaints is important

to facilitate FIMM in undertaking effective proceedings and investigations.

NOTE OF CAUTION:-
Investors are NOT to make any payment in cash to the UTC or issue a
cheque in the name of the UTC.

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About FIMM
The Federation of Investment Managers Malaysia (FIMM) was established in
1993 to develop the unit trust industry and promote unit trusts as the preferred
vehicle for investment and wealth management.

On 20 January 2011, FIMM was recognised as a Self Regulatory Organisation

(“SRO”) by the Securities Commission Malaysia via a gazette order. As an
SRO, FIMM strives to build the highest level of trust, integrity, standards and
ethics for investor security, advocate growth, educate the investing public and
to preserve market integrity by upholding investor confidence towards
investing in unit trusts and private retirement schemes (PRS).

As an SRO, FIMM has enhanced its corporate governance by creating a robust

framework for active surveillance, enforcement and disciplinary action for
breaches of rules and guidelines. One of our main tasks is to enforce
guidelines and regulations pertaining to our members and unit trust
consultants (UTCs).

Log on to www.fimm.com.my
for more information on the Unit Trust Investment Management Industry.