The recent decline in the NAV(Price) of the RHB funds are due to one of its sukuk holdings, Alpha Circle being written off by fund manager. Therefore, RHB fund manager have embarked on an exercise to write down (zerorise) all market value of Alpha Circle Sdn Bhd (ACSB) Sukuk effective 11 August 2023

Affected funds
1) RHB Bond Fund
2) RHB Energy Fund
3) RHB Golden Dragon Fund
4) RHB Goldenlife Today
5) RHB Growth & Income Focus Trust
6) RHB Income Fund 2
7) RHB Islamic Bond Fund
8) RHB Kidsave Trust

As investors who buy the bonds encountered a sudden lose. Funds were managed inappropriately by incompetent fund manager & team. What should we do to reclaim back the money?

Investing has risks. You cannot do anything unless you're suggesting there was an element of fraud in play, which is highly unlikely.

Funds #6 & 7 were severely impacted. The fund managers have to answer for the concentration risk they did with such a significant portion of the funds' portfolio invested in the sukuk.

These are the risks investing in unit trusts, I don't think unitholders can claim back the money - there are no PIDM for unit trust funds.

Maybe can sue for damages if the fund managers & trustees violate their own trust deed/stated fund objectives by overconcentrating in one sukuk, but it is unlikely you can get your money back.

One of the risk of buying @ invest in UT is not protection for losses....

Need to take risk... and pray no loses...

But fund manager also somehow need to be responsible for their actions.... seems like no law for losses incurred by those funds.... unit holder take responsibility

Just questions, the fund manager should not even buy this bad sukuk holding Alpha Circle at the first place. Did fund manager perform screening due diligently before buy? Why didn;t dispose/sell off all this sukuk holding once bad news had been exposed since years ago? Did investors been informed on this Alpha circle issue?

i think the problem is who would buy this sukuk from RHB when there are bad news about it?

How to sell when no market? Every company will have 1 or 2 bonds in their portfolio that get downgraded to BBB and if unlucky eventually it defaults.

AbbyCom,
How to sue/lodge a complaint for damages if the fund managers & trustees violate their own trust deed/stated fund objectives by overconcentrating in one sukuk? What is the governance body that we can complaint to?

Somehow, i feel a lot of times all these monies are put to invest into cronies companies. This is what happens when you give your money to someone else and hope to make you rich...

I think it's really hard to sue them..especially in Malaysia. The recent US bank collapse also causes multiple institution badly due to overconcentration by some of them.

It will probably be a long and tedious journey to sue them. You will need to gather all the investors together and even then, it will be long and tough fight.

I no longer follow UT in Malaysia. But from the RHB Income Trust Fund 2 prospectus at https://studylib.net/doc/8658389/rhb-income-fund-2. The regulatory body is Securities Commission. So you can go and file a complaint there. In the prospectus (bottom of page 4 and top of page 5) you can contact RHBAM, SIDREC or SC for complains and dispute resolution.

The RHB Fund prospectus did not mention any mitigation for concentration risk, unlike the UT funds I was more familiar with, the Public Mutual funds - they have investment restrictions in clause 1.4 of the prospectus like the screen shot below where investment in any one issuer cannot exceed 10% of their NAV.




While it is not mentioned in the RHB prospectus, need to see whether the trust deed between RHB and HSBC Trustees mentioned the investment restriction or not (but I don't think RHBAM and HSBC Trustees will reveal incriminating evidence against themselves to you).

I am no expert, it's just some things I learn how to hold fund managers to their own rules stated in the prospectus and to exit the investment if fund manager violate their own rules.

This post has been edited by AbbyCom: Sep 19 2023, 12:01 PM


Attached File(s)
 PBSTGRF_Prospectus_Web_Version_compressed.pdf ( 438.02k ) Number of downloads: 15

Looking at the number of RHB funds impacted and the % of impact to their NAV, this looks like one fund manager is managing multiple RHB funds and is being lazy by just investing in the same sukuk/issuer for all the funds under the fund manager. This also happens with Public Mutual.

The concentration risk due to over the allowed max % from the mandate could be, due to,
Many Investors exited the fund in large amount before that sukuk defaulted was announced officially to the public. When that happens the FM had to sell off holdings in that fund to meet those redemption.
Due to that holding having issue, it cannot not sell that holding. FM had to sell off other holdings.
End up that holding with issue will become a larger than expected % holding in the fund.

Hopefully the issuer of that sukuk can manage to pay back that sukuk. If that happens the NAV of that UT will shoot up tremendously.
Happened just few years ago to some of the RHB funds too

This post has been edited by MUM: Sep 19 2023, 12:56 PM

You can't do anything cause when you agree to put money with them it's already mentioned in the documents that there are risk and capital maybe lost.

Moral of story don't invest in anything China or Malaysia (due to politics). That's what I do and I don't bother with unit trust at all except PRS

Not to sound rude or unsympathetic.

Why would you think you can reclaim anything back? Started from entitlement behavior that is prevalent in Malaysia?

UT is an investment. You should expect to see some losses. There is no guarantees.

Even government bonds also you should expect a small chance of loss.

Hi @AbbyCom,
Manage to find the "Permitted Investment and Restriction" and "investment strategy" clause of RHB Islamic Bond fund. See attached. Don't quite understand & not sure how to interpret them. The current Alpha Circle concentration is 23.6%.

Bring this clause 1.7.7 to SIDREC or SC and see if you have grounds to file a complain and whether compensation is allowed. All the best, TS.

The clause seem to have a few loop holes to allow investment to exceed 20% or 30%. Let's see if the fund manager have any excuses/answers to SC to exceed that percentage.

Suruhanjaya Sekuriti

You can contact Sidrec, which is under SC, for disputes.

https://www.sidrec.com.my/

Whats the reason to bring up 1.7.7?

Clause 1.7.7 say any one issuer cannot be more than 20% of the NAV to prevent concentration risk.

The NAV impact to two RHB funds as a result of zerorizing the sukuk value are above 20%, so fund manager 'allegedly' seems to have not followed the clause 1.7.7 in not letting any issuer be more than 20% of NAV.

But this being a legal document that we commoners do not quite understand, we raise this clause up to SIDREC/SC and see what is the reply, because there seem to be a few loophole for the fund manager to exceed the limit.

For example when fund manager bought the bonds, the NAV is below 20% but over time the bond value could have gone up or redemption to the unit trust fund have reduced the overall NAV such that this single issuer's NAV is >20%. The clause should then provide a time frame for the fund manager to reduce his exposure to below 20%.

Yep, UT no PIDM style protection, however TS has the right to seek explanation from FM or to find out if any risk mitigation SOP(s) were not followed.