Malaysian unit trust aggregate performance

Abstract

Purpose

This paper seeks to focus on examining unit trust performance in Malaysia over the period 1991‐2001.

Design/methodology/approach

The broad based study covers full economic cycles using 7 different performance measures: raw return, market adjusted return, Jensen's alpha, adjusted Jensen's alpha, Sharpe Index, adjusted Sharpe Index, and Treynor Index.

Findings

The results show that on average the performance of Malaysian unit trust falls below market portfolio and risk free returns. However, the variance of unit trust monthly returns is less than the market. Performance by type of funds indicates that bond funds show relatively superior performance, over and above the market and equity unit trusts. This is due to the high interest rate kept during the crisis period. Findings also suggest that there is no persistency in performance as there is no significant inter‐temporal correlation between past and current performance.

Research limitations/implications

The issue of inferior performance needs further investigations to adjust for great importance placed on maintaining consistent dividend distribution. In addition, ill‐managed funds must be separately analysed to see if limited budget, less qualified managers, use of limited information and less sophisticated software could explain the poor performance.

Practical implications

A very useful source of information for potential investors and portfolio management companies looking for opportunities to invest.

Originality/value

The paper contributes to the present body of knowledge by offering broad based performance evidence from an emerging market with strong government back up for unit trusts investment.

Citation

Fauziah, Taib and Isa, M. (2007), "Malaysian unit trust aggregate performance", Managerial Finance, Vol. 33 No. 2, pp. 102-121. https://doi.org/10.1108/03074350710715836