Introduction

It has been a while since I’ve posted something about the top performing funds available in the Malaysian market. So I took a quick peek at the latest issue of Personal Money and found my way to the Lipper Tables which list the funds with the best results as of 29 February 2008. Since there are hundreds of funds in Malaysia, I’ve decided to just pick out the Top 12% (arbitrary % decided by me 🙂 ) of funds in their asset class as follows:

 

  1. Bonds
  2. Equities
  3. Mixed Assets
  4. Guaranteed Returns
  5. Investment-linked Insurance

It’s important to note that this list is for your information only, and of course does not represent a recommendation to purchase. Note also that the usual caveats apply, for perfomance tables i.e. that past performance is no indicator of future performance. Some of the top funds of 6 months ago are languishing close to the bottom of their asset class….so beware when picking funds just based on their past returns. In your fund-selection decision, you should consider not just returns but also other performance indicators, such as:

  • consistency of the fund’s returns
  • the rate of risk or volatility (i.e. some top performing funds have a high volatility rate, which means when you could just as easily fluctuate to a loss position)
  • the risk-adjusted rate of return, in essence a combination of the two preceding items
  • capital preservation ratio – a measurement of the fund’s historical loss avoidance relative to other funds
  • track record of the fund manager
  • sales charges and annual management fees

Mutual funds are a mid to long-term investment vehicle so be prepared to hold your investment for at least 3-5 years before selling out or switching to other funds. Sales charges typically range from 5%-6% for equity funds and 1-2% for bond funds. You will usually also incur admin charges for switching between funds (around RM25). Because of these charges, I’m generally not an advocate of buying mutual funds for the short-term, or for investors to pursue a trading strategy for mutual funds i.e. buy and sell with the aim of making quick gains.

The funds range from conservative to medium to aggressive or high risk so understanding the nature of the funds that you are buying into goes a long way towards helping you in your decisions to buy, hold or sell during uncertain times.

Best Performing Funds as of 29 February 2008 – Bonds

Bond funds are funds that typically invest in fixed income securities such as bonds, Treasury bills and corporate debt securities (eg. debentures), and the money market. In Malaysia, they are usually the most conservative of mutual funds, and cater to risk-averse investors. However, given their objective of preserving capital for the investor, we also see bond funds generating lower returns generally than equity and mixed asset (or balanced) funds.

The tables below indicate the best performing bond funds for the 5 year period ended 29 February 2008 in terms of returns:

  1. Table A – Non-Islamic bond funds
  2. Table B – Islamic bond funds

Please also read the Table Interpretation at the end of this post for more information on how to interpret the tables.

Table A – Best Performing Funds: Bonds-Non-Islamic

 

Fund Name

Indices

5 years

3 years

1 year

 

 

       
 

Non-Islamic

       
1) PB Fixed Income LL3 38.35% 21.48% 4.91%
2) Public Bond 443 34.38% 18.32% 4.45%
3) Avenue BondEXTRA 44L 31.06% 16.58% 5.31%
4) Affin Capital 33L 30.09% 15.44% 4.17%
5) MAAKL Bond 22L 29.68% 13.72% 3.80%
  Special mention:        
  AmDynamic Bond  LL2  – 36.07% 5.52% 
  CIMB-Principal Strategy  LL2  – 30.98% 3.39% 
           
  Average return   23.9% 13.61% 2.81%
  No of funds 39 17 24 37

 

The top two best performing bond funds over the last 5 years, PB Fixed Income and Public Bond fund, are both managed by Public Mutual. PB Fixed Income generated am average return of 7.65% over the past 5 years, above the average annual return of 4.78%  achieved by its peers within the 5-year category. There is a distinction between PB and Public funds. PB funds are sold through Public Bank branches whereas funds with “Public” instead of “PB” at the start of their moniker are sold by Public Mutual’s agents. AmDynamic Bond achieved the highest returns for non-Islamic bond funds over the three year period ended 29 February 2008. Its 3-year total return of 36.07% translates to an average annual return of 12.02%. Incidentally, its fund manager, AmInvestment Services also won the Edge-Lipper Malaysia Fund Awards 2008 in the Group Bond category. 

PB Fixed Income. Public Bond and AmDynamic Bond all scored “L” in the Total Returns and Consistent Returns indices, which means that they are ranked in the top 20% amongst their peers within the non-Islamic bond category. In terms of preservation however i.e. historical loss avoidance, Avenue BondEXTRA, Affin Capital and MAAKL Bond fared better than the “top guns”. 

Table B – Best performing funds: Bonds-Islamic 

 

Fund Name

Indices

5 years

3 years

1 year

 

 

       
 

Islamic

       
1) Public Islamic Bond 443 35.87% 18.24% 4.54%
2) ASBI Dana Al-Fakhim 222 24.58% 12.86% 4.44%
3) AmBon Islam 442 22.27% 18.3% 3.96%
  Special mention:        
  CIMB Islamic Enhanced Sukuk LL2 20.44% 5.62%
           
  Average return   25.93% 13.06% 2.51%
  No of funds 21 4 13 20

 

The top performer over the 5 year period to 29 February 2008 in the Islamic bond fund category, Public Islamic Bond is once again a fund from the Public Mutual stable of funds. It returned 35.87% over 5 years which translates to an average return of 7.17% pa, just a tad below the top performer in the Non-Islamic category, PB Fixed income. However the fund scored a rating of “4” in terms of the Total Returns and Consistent Returns indices, which indicating that historically the fund was not in the top 20% of funds within the Islamic bond category of funds.

Over 3 years, the top performer was CIMB Islamic Enhanced Sukuk with a total return of 20.44% (average 6.81% pa) and it achieved “L” rating for both Total Returns and Consistency out of the 13 Islamic bonds funds compared over the 3-year period.

Table Interpretation

  1. The ranking of returns is over 5 years. Returns do not take into account sales charges and are adjusted for dividends, which are assumed to be reinvested. However the funds’ performance over 3 years and the past 1 year to 29 February 2008 is also indicated.
  2. The fund returns shown for 5 years and 3 years’ period is the cumulative return for 5 years and 3 years respectively. Dividing the cumulative return by the no of years covered will give you the average annual return for the fund.
  3. The Average return row indicates the average return achieved by that particular asset class for the relevant period. So, over the last 1 year, we know that non-Islamic bond funds as a whole achieved a return of 2.81%. That’s lower than the fixed deposit rates!! And we haven’t even factored in the sales charge yet!
  4. The  No of funds row (last row) tells you how many funds are in that asset class for the relevant period. For example, in the case of Non-Islamic Bonds asset class, there are a total of 39 funds of which funds that have been in existence for at least 5 years total 17, and those that have been around for at least 3 years total 24.
  5. Special mention lists down funds that have performed well over the 3 years to 29 February 2008, but have not been in existence for 5 years so were excluded from the Top 5.
  6. Indices refer to the 3 key indices: a) Total return b) Consistent return and c) Preservation.  a) Total return is a measure of a fund’s historical total return relative to its peers within the class b) Consistent return is the historical risk-adjusted return of the fund relative to its peers within the class c) Preservation is an indicator of the historical loss avoidance by the fund relative to its peers within the class. Each character in the 3-character ratings refer to the ranking for a) b) and c), in the sequence shown  i.e. the first character gives the ranking for a) Total Returns, the 2nd for b) and the 3rd for c). A rating of L indicates that the fund is a leader and in the top 20% in its class for the index being measured, a rating of 4 indicates that the fund is in the next 20% in its class, a 3 rating indicates that the fund is in the middle 20%, a 2 the next 20% and a 1 rating indicates that the fund is in the bottom 20% of its class for the index being measured.
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