You know I was calculating whether unit trust is really worth it or is it just hype. So I took one as an example and benchmarked it against the FD to see whether it is really good or is it all hype.


Name of Fund Public Growth Fund

Category of Fund Equity Fund

Approved Fund Size 4.5 Billion Units

Launch Date 11 December 1984

Investor's Risk Profile Moderate




Fund Objective
To achieve long-term capital appreciation with income considered incidental.



FEES & CHARGES
Service Charge 5% - 7% of NAV per unit
Repurchase Charge Nil
Annual Management Fee 1.5% per annum of the NAV
Management Expense Ratio(%) 1.56 (for Financial Year Ended 31 July 2005).


Annual Trustee Fee
0.06% per annum of NAV, subject to a minimum fee of RM18,000 and a maximum fee of RM450,000 per annum.


For fund financial report please go to
http://www.publicmutual.com.my/page.aspx?name=PGF

go to review, register and download the report

Now


Assume I have RM100,000 and I invested on 2004 (since they have only 3 years data shown)

Beginning 2004
Service charge for purchasing = RM6000 (average service charge)
Total investment = RM 94,000

Annual return 2006 = 4.78%
Annual return 2005 = 12.3%
Annual return 2004 = 16.79%

Investment value end 2004 = 109782
Management fee = 1700
Net Investment Value = 108082

Investment value end 2005 = 121376
Management fee = 1820
Net Investment Value = 119556

Investment value end 2006 = 125270
Management fee = 1879
Net Investment Value = 123391


End of 2006 Sell
Sale value = 123391
Service charge = 8637
Total amount = 114754
Net profit over 3 years = 14754
Annual returns = 4.918%


FD returns

4.2% for 36 months (3 years)


Now the point of my post , take a look closely. The unit trust "supposedly" has an average annual return of 11.29%(I think this is considered on the high side) for the three years but after cashing in on the profit you realised that it ONLY ouperforms FD by 0.76%. Can you imagine if the fund annual returns was just average say 7-8%.

Where did all the money go?
1.) Management Fees charged annually. This fees can go up to 3% REGARDLESS of how the fund is doing.
2.) Service charges. Every buy and sell are charged 5-7%.

So if a Unit trust fund boast on high annual returns, please do the maths and calculate how much the fund need to perform to cover all your "losses". I notice most of you just take annual returns figure without taking into account these factors at all.

Now do you still wonder why hundreds of million has been lost in unit trust as reported in the newspaper?

The percentage returns was taken from their financial report. Since I'm not able to find out all those details such as splits and all. I've taken their own return of investment figure as calculation. It's accurate as they've taken account unit splits, distribution and rise as well as rise in unit price.

For eg 2006:-

1. Total returns of the Fund is derived by this formulae:
End of Period FY2006 Bid Price - 1 = 4.78%
_________________________
End of Period FY2005 Bid Price
(Adjusted for unit split and distribution paid out for the period)


* Public Mutual only imposed the service charge once, on your initial/first investment. After that only management fees 1.5% perannum

Yes I've taken that into account, although I have to correct myself on imposing service charge twice. Still my point is, NETT RETURNS is a more important figure than what the returns the mutual funds tell you. An 11% average return yields only 7%++ when you talk about NETT RETURNS in 3 years. A big sum of profit goes into financing the management of the funds. And the thing is, even if the fund is losing, you STILL have to pay management fee further adding salt to the wound. It also means that the mutual fund charges you a fee even if the fund is not performing at all.

Somehow the risk vs returns is not worth it, at least for me or maybe at least for majority of the mutual funds in malaysia.

Speculation in the making.