I've been following this thread for an awfully long time and I'd like to share my 2 cents worth on those waiting on the PNB's next fixed priced fund...

Personally, I don't think they will launch another one. Even if they would like to, the authorities wouldn't like it too much. PNB/ASNB's AUM is now in the billions and represents a huge chunk of our equity stock market. Mind you, some would deem them as a shadow bank because of their size.

And it is due to this very reason why the regulators would somewhat frown upon them if they were to launch another fixed priced fund. Imagine if its customers were to do massive withdrawal ( a run ) due to one of many potential reasons (economic crisis, political unrest, etc2..), it would be disastrous for the equity markets. And since fixed priced funds are pegged at RM1 regardless of its actual NAV per unit, it would make things worse. Unlike EPF which also has an equally large impact due to its size of participation in the equity markets, you can't do a run on EPF as the latter's withdrawal is governed by rules and regulations.

The next economic cycle is coming up (1997/98, 2008, 2017/18?) so even if they were allowed to come up with a new fixed priced fund, it wouldn't really be a good idea. They might consider one post 2017/18 if they picked up equities during the anticipated upcoming downturn.

Again personally I doubt that they'll be coming up with another fixed priced fund. They may potentially expand the existing fund sizes but that again would not be "liked" by regulators such as SC and even BNM. Mind you, these fixed priced funds are classified as low risk medium return investments. Chasing yields for it in order to give healthy dividends is not easy.

Just me 2 cents

I believe (and hope) that sooner rather than later, PNB adopts online transactions via its own website/portal. That would certainly help those who have to rely on physically going to banks to try their luck although I can only imagine the volume the site would have to handle given the amount of people who will try their luck (now one could only do it during lunch time but online....every 2 minutes also can!) to perform additional purchases for their fixed priced funds

To me, there's really no exact way for anyone to predict the behavior of these fixed priced fund unit holders. If the demographics does show that baby boomers occupy the large majority of unit holders, turnover of units would be low.

They've been in it for the long term and given the stage of their lives/careers at this moment, they wouldn't have any need to dilute their unit holdings (eg: good salary, senior position, comfortable loan repayment(s), empty nest due to children already working) for monetary usage. With the advent of retirement age being increased till 60, the need for withdrawal to fund their post retirement life would be delayed even longer.

Unless the demographics skew towards the younger generation (late 20's to early 40's) than you may see more volatility in terms of fund movements. Redemption of units for big purchase items such as a house or a bigger car or children's education or go on an overseas holiday trip or so many other reasons may see a higher turnover of units of the fixed priced funds.

Another theme that I've noticed following this thread(s) is the fact that so many complain and whine about not being given a piece of the pie when it comes to PNB's fixed priced funds. Everyone wants it easy, low (to almost no) risk with returns that beat FD and inflation rates consistently over a period of time since PNB's inception.

But PNB is not the be all or end all; it's not a zero-sum game if you can't invest in it. With enough research and some work, you could easily beat PNB's dividend policy because to be fair, PNB's dividend policy isn't what it used to be. Given the fact of course that back in the day PNB used to give double digit returns for ASB, look back at the historical savings and interest rates back in those days.

For me (personally), if the trust in PNB is so high, why not invest in their variable priced funds? If the dividend track record for these funds are close to what the fixed priced funds give out, not only you enjoy the high dividend yields but also increasing the actual total returns on your investment with additional profit from capital appreciation.

I have long since diversified my unit trust investment(s) to include other fund managers because I got tired of hearing the same justification of "we can actually pay out xx sen dividend but we're only paying xx send dividend as we bring forward the balance xx sen for retention to be used when the economy isn't doing to well"

ps: And no, please do not ask me what funds you should invest in. You need a license for that and I haven't got one ya

I'd have to disagree with this statement and it's not because I'm defending PNB or anything. To be fair, any financial institution are susceptible to a 'run'. Listed financial institutions are at more risk as not only they can be a target of a bank run by its customers but also a run on its equity stocks. So in the event there's an economic crisis of epic proportions, no financial institution is safe no matter where you're money is. Unless of course it's capital guarantee (like BSN) or protected by PIDM, the latter which only supports up to a certain level.

With regards to honoring redemption activities, again there are rules and regulations. In fact, financial institutions like PNB or other fund management companies may be a safer bet than banks. Why? Because banks all over the world use the fractional reserve banking concept. Fund management companies do not practice the same fractional banking concept (to my knowledge of course) as it can only invest what money is in its books.

Fractional reserve banking is a concept where a dollar deposit may actually be split to fund products that's worth more than the dollar and only a small portion of it is reserved. I know it's a very simplified version of an explanation but the information is there if you care to read but you can deduce why a run on banks may be bad for those who are late in the redemption game.

And from what I can gather, any GLC/GLIC in the world does not directly contribute to any government's coffers unless via taxes. In fact, some countries clearly demarcate the difference between GLC and GLIC. GLIC channel funds from unit holders to GLC's for investment. In return, the govt obtains influence to appoint board members and senior management people of GLIC's which functions to provide funds for operations of GLC's, guaranteeing capital and income for unit holders.

In the case of Malaysia, Petronas would be the only GLC that directly contributes to the government's coffers. GLIC's such as Khazanah, KWAP, LTAT, LTH and even PNB provide income to the government either in the form of taxes or the taxes that the GLC's that they invested in pays or other taxes that may result in the event that income to unit holders generated or other indirect effects to the overall economy that may benefit the government. Heck if I'm not mistaken, all PNB's fixed priced funds are tax exempted?

I'm no expert but just my 2 cents from what I can gather only

This post has been edited by hyelbaine: Jun 17 2013, 04:27 PM

You're far too kind with your comments, really I am no expert. Again, I do not claim to be well versed enough to have my comments be considered as good as gold. I only share my feedback based on what I've learned and experienced myself. I like to read and learn about finance and the economy in general but my comments are quite sparse and unless I can really contribute to the discussion, I'll keep it to myself.

As to my actual profession, I'd rather keep it to myself . Malu a bit cause I'm a nobody and besides, investment in financial instruments in Malaysia is a highly regulated industry with strict rules and pretty hefty penalties if they are broken.

If there's a mistake in any of the points and facts, I stand corrected

I believe that your theory really over simplifies things. Unit trust investment isn't really a one to one trade, it's all based on net asset value of each fund and the exposure of each fund to the equity market(s) that the fund is invested in. If for example the KLCI drops by 10 points, it does not neccessarily mean that your NAV per unit drops by the same margins. Another thing to bare in mind is at which point that a unit trust fund acquired the equity. They may have bought it when the valuations was very low so even a hefty fall of the stock may not fall far enough to cause a loss for the fund.

The scenario that you described also happens if the fund manager invested in each and every single counter on the stock market; which goes against the whole idea of unit trusts.

Unit trusts are supposed to invest in a broad range of securities. However, if the securities are all in a similar type of asset class or market sector then obviously there is potential for a systematic risk that all the shares could be affected by adverse market changes. That may still not give you the losses that you had speculated because if it did happen, there's something wrong with the fund managers of the unit trust company.

So to avoid these potential risks or losses, UTMC's are supposed diversify their funds into different not perfectly correlated asset classes, providing balance and diversification that say a normal retail investor may not have capability to do so. If you invested in Maybank for example at RM10 and the equity valuation drops BY 50%, than yes your equity value is now RM5. Unit trusts in concept/idea is supposed to avoid this by diversifying investments on behalf of the investor.

Not sure if I have clarified things or made it worse for you

One of the biggest misconception for people that invest using ASB loans is that banks will always sell the idea that the returns include bonus as absolute when it certainly isn't. The calculation of ASB bonuses are not as straight forward as dividends and lumping it together to show how 'healthy' the margin is a blatant lie in my humble opinion.

Investors should always understand that interest rates are not static and will always move. Personally, if your margin is less than 3% excluding the bonus, you're not leaving much room to manouver when you're tied down with a long tenure because the OPR will shift given the fact that interest rates are currently very low.

My 2 cents...

CCRIS includes all loans regardless of type in their reports because no matter what type of loan it is (HP, credit card, housing, personal, ASB loans) are still considered as risk exposure to a person. I don't believe that ASB loans are excluded when banks perform their risk and credit assessment on potential customers. They may have a lower weight-age and risk scoring for ASB loans but it does not mean that they're excluded.

When BNM enforced the prudent financial framework for FI's to follow, the former insisted that all types of loans are included when calculating a customer's exposure against NET income. If I'm not mistaken, even PTPTN loans are also taken into consideration but may be neglected if the installment or the total loan amount is small (<100k loan with RM100 installment). So to a comment in the previous post how someone with ASB loans can still get a housing loan, banks (at their discretion) may still accept the application but the customer may not get the best rates possible; one may get say BLR-2.5% if without ASB loan but may only be entitled to BLR-2.4% or lower if the former has some ASB loans.

While BNM does not have oversight on FI's registered under MOF, these institutions have begun reporting to BNM for CCRIS, FISS, ITEPS, EILIS, ISRS and a whole host of other stuff that BNM requires reporting either on monthly and some even weekly basis. These MOF registered FI's used to be a loophole which have now been closed by BNM thus causing customers who "used" to take loans from these institutions to no longer benefit from not being included in CCRIS reporting.

At least we haven't reached the stage of those in the states where even your behavior in paying bills such as your mobile phone actually contributes to your credit/FICO scores

This post has been edited by hyelbaine: Jul 1 2013, 09:19 AM

If those people (who complained initially) ever read the quote by Buffet in your signature, they wouldn't be in such a predicament eh? hehehehe

It's a malaise affecting the Malays in my books. To be fair, those who were part of the baby boomers generation were awesome savers. The savings rate back in the day was easily triple to what it is today. I guess these generation knew how hard money was to come by and wanted to be sure that every single cent is made to work just as hard for them.

However, it would be quite simplistic to generalize that all Malays save poorly. I think because in general the majority of Malaysians are Malays, even if 1% of the entire Malay population have little or zero financial literacy, the number can easily look very big. What I've realized is that financial literacy is highest among the Chinese but that too, only in the Gen-X age group. This generation still went through a rather "tough" growing up phase where wealth was still quite limited.

Gen-Y and millennials however are a different story. These are the one's where wealth has already been built-in to their respective families and the story of "how hard it was to make money" may not have been repeated nor felt by them. Ask any UTMC and they will tell you that these age-groups represent the smallest number of customers (exclude amount in comparison) compared to the other age groups. Some may say that this is due to the fact that they don't have much to save but I'm of the opinion that these people do not see the reason to save and/or invest because wealth seems to be already part of their lives.

When it comes to these age groups, savings rate are at an all time low while private/personal debt levels are the inverse of the former. Again, just my 2 cents based on my own personal observation and hypothesis.

To be fair, a fund like ASB will never be fully taken up. It's an open ended fund so essentially, there's no way for ASB to be fully subscribed. AS1M however is picking up quickly due to the fact that there's no individual cap on the amount that can be invested. Looking at how ASW, ASM and ASD have been scooped up by bumi's, AS1M should be taken up completely in the near future.

A quick read on PNB's corporate mission statement would explain why such quotas continue to exists which is the main reason why PNB was even setup in the first place.

I'm again of the personal opinion that PNB is not the end all or be all. It wouldn't be the end of the world if you can't invest with them because investment shouldn't or isn't supposed to be a zero sum game

All the more reason that everyone should write in to PNB and ask them go launch an online portal/website ASAP heheheheh

Wow, 6% (actually about 7 ex bonus) dividend return at little to almost no risk and no service charge at all is considered bad eh? I know many in this thread alone who would love to be in your shoes

I believe SC wouldn't allow that the ads focus too much on the 2% promo. From what I can see, PNB follows the ad guidelines by SC to the letter as compared to the other UTMC's. Even if you see the ASG ads on tv or YouTube it hardly mentions the 2% prominently.

Personally 2% for ISC is pretty low. Even if you compare it with say other UTMC's. Rates like that are normally only available on fund supermart.com

As to why it's hard to find coverage of PNB's funds is because such investment houses or rating agencies like lipper, morningstar or Moody's does charge a hefty sum. PNB may not see the benefit of paying if its track record speaks for it self

SC is the securities commission, the body that regulates the entire industry. ISC stands for initial sales charge, it's the rate that unit trust management companies (UTMC) charge for each transaction made.

The last paragraph is actually what many UTMC use to sell their products. For example when public mutual claims that their product has a 5 star or whatever rating, these ratings are provided by these agencies.

Personally after the 2008 financial crisis, I take whatever these rating companies say with a bucketload of salt Remember, they are being paid to rate and are not truly or entirely independent. The same goes to investment banks that rate stocks or IPO's

Glad I didn't confuse you further hehehhe

I dare not say that PNB's fund managers are flawless, no one is that good. But it does help when you have more than 200 billion in assets under management (AUM) and the fact that most if its funds are 'mature' ie: they probably have invested muh earlier meaning that their average cost is low thus providing them leeway in managing their portfolio.

I agree that PNB's name carries a lot if weight (in MY at least) and its true that ppl DO line-up for hours whenever they launch a fixed price funds. I wonder how many 'stars' would ASD, ASW, ASM or the rest would get if they were rated; fixed price+good dividend yields+no ISC+low risks

True that. Personally though, comparing unit trust performance has to be made up to 5 years historical. I remembered a year or 2 ago, most of the unit trust promo materials that I went through only showed historical performance of 1 and 3 years max. Why? Well if one were to show a 5 year chart, that would have to include the 2007/8 financial crisis in which everything got hammered. I remembered some friends who's unit trust investments actually had negative returns.

If you're a long term investor (which what unit trust is all about) than go back as far back historically when comparing performance. UTMC's will always do their best to avoid including in their charts those years when the market tanked. And remember too that dividends alone is not good enough, yield is more critical in my opinion. So too is the ISC, annual maintenance fees, trustee fees, management expense ratios and the likes. Only then can you get the actual total returns on your investment.

UTMC's like to focus on the big number (dividend) but if one is not careful, actually those products with supposedly lower dividend actually gives you better ROI when you take into considerations everything I've mentioned above.