My definition of which are the “best mutual funds” would be funds that satisfy the following conditions:

  1. achieved the highest total returns
  2. with consistent performance over at least the medium term (i.e. 3-5 years) and
  3. have a relatively high “capital preservation” factor

Also they should also have the lowest management expense ratios…which I’ve found can really eat into your returns in a big way.

My starting point is the Top Performing Funds tables published by Personal Money magazine in conjunction with Lipper (fund rating agency). These tables narrow down the 300+ funds in the Malaysia mutual fund universe to the best performing funds over a 1-year, 3-year and 5-year period under various categories like Equity-growth, Equity-income, Mixed Asset-Growth etc etc.

To make life simple, I thought I would just narrow the list even further and group the funds under the following broad categories:

  • Equities/Balanced
  • Bonds/Money Market
  • Capital Guaranteed

The rationale is as follows:   if I put myself into the shoes of an investor who’s main aim is exposure to equities and a fund that gives the best performance in terms of returns, consistency and capital protection, then it shouldn’t matter to the investor whether the fund also holds fixed income securities (balanced fund) or focuses on equities entirely. Conversely for a more conservative investor who wants to avoid stocks, then bond or money market funds would be the broad category to look for. I’m also assuming here that the investor would have already figured out his or her overall asset allocation requirements before this.

In addition to UT funds, I’ve included Investment-linked (IL) insurance funds into the mix since PM also publish tables on top performing IL funds. These funds are in essence a type of investment vehicle, notwithstanding that they are usually sold as insurance products. (I won’t get into the debate on investing in IL vs UTs here but maybe more on this later).  


I filtered the funds according to the following criteria (in that order):

1) Highest total return over 5-years, 3-years (if fund < 5 years old) and 1-year

2) Consistent performance. To make my final cut, the funds would also have to satisfy a minimum return of at least 70% (average 14% per annum) over 5 years, 39% (> 13% pa) over 3 years and at least 12% over the last year to 8/6/06. For example if a fund achieved > 70% returns over 5 years but less than 39% over the last 3 years, it would be excluded. Furthermore, funds which meet Lipper’s criteria for consistent performance over 5-years or 3-years are denoted with a “L” in the table below. 

3) Capital preservation. It would have to be a Lipper “leader” in terms of capital preservation i.e. defined as within the highest 20% of funds within its Lipper grouping in terms of historical loss avoidance relative to other funds within the same asset class  

Here are the 14 funds that match my performance criteria and their returns (as at 6 June 2006):

  Co 5-year return 3-year return 1-year return Other info Cons Ret Cap pre  
1 Hwang-DBS Select Opportunity 0.00% 70.93% 12.40% E   L    
2 PB Growth 0.00% 68.10% 15.48% E   L L  
3 Public Ittikal 87.83% 56.13% 12.91% E   L L Y
4 Manulife Equity 83.56% 53.19% 14.26% E IL      
5 Public Equity 0.00% 52.32% 14.07% E   L L  
6 Public Industry 80.98% 50.84% 12.06% E   L    
7 Public Aggressive Growth 77.09% 50.08% 15.93% E   L    
8 Public Regular Savings 78.92% 48.60% 12.57% E   L L  
9 OSK-UOB Equity 89.53% 48.00% 14.29% E   L  
10 Public Index 72.95% 47.62% 12.90% E I L L  
11 Manulife Managed 76.96% 46.47% 13.47% B IL      
12 PRUSmallcap 74.46% 45.41% 12.21% E SC L    
13 Avenue EquityEXTRA  75.75% 43.87% 17.67% E        
14 TA Comet 118.82% 42.90% 17.54% E        

B-balanced, E-equity, IL-insurance-linked, I-index, SC-small cap, L-Lipper leader (top 20% within its asset class)

Of the 14, 8 are managed by one company i.e. Public Mutual. Only 2 are investment-linked (IL) funds whereas 12 are UT funds. Only 1 of the funds is Syariah-compliant i.e. Public Ittikal.


Looking at which of the above funds are Lipper leaders in terms of both consistent returns (defined by Lipper as “historical risk-adjusted returns, adjusted for volatility”) and capital preservation, we can narrow the list down further to just the following 5:

  1. PB Growth
  2. Public Ittikal
  3. Public Equity
  4. Public Regular Savings
  5. Public Index

Again interestingly, all are managed by Public Mutual. Hwang-DBS Select Opportunity although top of the list in terms of 3-year returns of 70.93% was ranked 4th by Lipper in terms of capital preservation i.e. amongst the bottom 40% of funds in its category.

I have actually invested in the Public Ittikal fund. After almost one year since Aug 05, it is more or less at break even from the 6.5% initial sales charge. Returns would have been better had it not been for the market correction in late May/early June. But since this is a long-term investment, I will hold on.

In my next post, I will show the results of my comparison for Bond/Money Market funds…