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.

For discussion sake...

It's not a loophole. They are allowed to go all the way to 30% provided they meet certain rating conditions.

The other hand, the re-rating was sometime in early Jan 23. I believe with all the adverse news coming out and all, it would be quite difficult to dispose of the Sukuk. Hence, they can only hold on to it until all avenues exhausted and the security is zeroized.

As to SIDREC requirements, you will need to write to the fund manager first and ask for explanation. The fund manager has 90 days to resolve your complaint. Once you have obtained a final response from the fund manager, and the response is not satisfactory, you may proceed to file a claim with SIDREC within 180 days from receipt of final reply.

Please note, if you go via SIDREC, your claim will be capped at RM 250K.

Yes, for discussion's sake and to help TS have at least some avenues for redress instead of just accepting his fate. TS really at a loss what to do.

Also to put fund manager(s) on the spot so that if he/she really messed up, don't get away so easily. Or at least for TS to get a proper explanation rather than just take the NAV writedown like that.



BTW, you seem like someone quite well versed in these matters, any thing to advise TS?

You are required to read and understand the prospectus before completing the application form. Also, you maybe required to complete a suitability assessment to indicate your risk tolerance. It would be quite tough for anyone to paddle backwards. As with any investment, there is always a risk. The downside is because the fund is diversified, the fund many have retained some value instead of suffering a complete write-off.

Some of the things I can think of on top of my head is...you may want to ask the fund manager:

1. why was the Sukuk chosen;
2. Why wasn't it disposed off when the Sukuk was re-rated;
3. why was such a large concentration of the sukuk opted?; and
4. Also, whether the limits and restrictions had been complied with.

Ask them for an explanation on this.

Any claim for compensation generally is a very tall order unless you can show that they have deviated from the prospectus.

Sorry to say whatever explanation given will likely be big BS as you should investigate who is the LA/FA for facilitating this issue of the sukuk in the 1st place 🤦‍♀️ which is why they cannot disclose the issue itself which is why they are HODL it until to zeroise the value

This post has been edited by xander2k8: Sep 19 2023, 07:04 PM

OIC...

So no need to waste time and accept fate while filing complaint to SIDREC and pray that they will take action instead 🤦‍♀️ but chances are close to 0 because of the LA/FA would have sorted out this with RHBAM before they invested into it and remember money out left hand and still goes back in the right hand

It's a unit trust fund. Why do I want to know who the LA/FA for facilitating the issue. Even if i knew who they are, I don't have a contract with them, only with the trustee, in which the legal interest of the unit holder is vested with and the fund manager engaged to managed the fund based on the prospectus.

If you have read, both newspaper, media, publicly available info and the annual report, you would have known why the company defaulted.

Where the asset is incapable of being valued, the operations will zeroized it.

Whatever it is waste time or not, it is the right of anyone to exhaust all avenues. If someone files a claim and got back something, are you going to be liable to compensate TS cause he/ she took your advise?

As I have mentioned, the fund needs to be managed in accordance with the limits and restrictions contained in the prospectus, to mitigate concentration risk. Depending on which fund TS invested in, especially those which suffered a huge drop and material exposure, its worth having a look at.

NAV dropped 20% just because one sukuk is writeoff is a major big red flag.



This post has been edited by john123x: Sep 19 2023, 08:34 PM

I mean if 20% of the portfolio comprised that bond, it makes sense. Was the coupon high?

Not so easy to catch a asset management making such stupid mistake like not following maximum allocations per bonds. It will be allowed in their mandate.

I think you don’t understand UT in the 1st place 🤦‍♀️ doesn’t matter what it says in the deed as you do not and will not have to power to change the deed in the 1st place 🤦‍♀️ hence which is why it is called UT in the 1st place as when the second you invested in them you have already given your trust to them for the manage the units itself 🤦‍♀️ and you will and will not have say in the deed in itself 🤦‍♀️

aurora97, are you asking to change the deeds that had been established?
Or "he" is just ..........

Never asked to change the Deed. I am saying what is in the Deed.

Not sure what the other guy is rambling about.





No one said anything about changing the Deed. Not sure how you mistook what I said and turned it into something else.

Despite the impression of "free reign" the manager, as I have mentioned, it has to be managed in accordance with the Prospectus (i.e. the strategy, restrictions & limits). For instance, you can't be buying bonds for an equity mandate, vice versa.

The legal rights of the unit holder is vested in the trustee. The trustee is suppose to safeguard the interest of unit holders and custodize the assets of the fund. If the Trustee is not doing it's job (i.e. allowing the manager to buy assets that are not in accordance with the prospectus/deed) holding the manager accountable, you mean there is no re-course for unit holder agianst the trustee and manager? This is mind blowing to me.

man, not even bond fund is safe. 60/40 is a joke

Facepalm guy, please stop rambling will ya.

Isn't this the 2nd time rhb has been hit with this? Iirc weren't their funds badly affected by MEX sukuk before too? (might be wrong and it was a diff fund house if so I apologise)

60/40 is probably a balanced fund, as it is not a dedicated bond fund, it will probably have less exposure.

Any investment carries with it risk. Buy something within your risk tolerance. The higher the risk, the higher the return and consequentially the greater possibility of loss.

Believe, it had been given extensions few times. Had been selling the good quality issuer to cover the the bad issuer ACSB. Only recently kementerian Dalam Negeri (“KDN”) has decided not to grant an extension of the concession via a letter dated 3 August 2023. The whole thing exploded out.

What you mention is Alpha Circle. The other bond is MEX, some funds have this bond.

I don't trust any investment-related products from banks anymore especially SCB, RHB.

This post has been edited by Sunshape: Sep 21 2023, 10:44 PM

RHB fund managers are well known for this. Couple of times it has happened, taking risk on riskier bonds. Iianm, 2017 or so. Well could be opportunity for some

high risk high returns... your choice

nobody forced you...

Actually SCB is just the seller. All banks practice this. They want to make money off you especially in your case priority banking. Then RHB here is like the farmer.

That's why don't buy anything from banks. Dont accept any priority banking BS. You want to be priority banking, be prepare to buy stuff from them or park your money with them or take huge amount of loan from them.

This post has been edited by Ramjade: Sep 22 2023, 08:23 AM

This is true but when we dig deeper into the fund's profile like RHB Income Fund 2, the following is noted:



What we can deduce from RHB Income Fund 2, it's for "conservative" investors and the fund need only to outperform the benchmark, which is RHB's 12 months FD rate.

When Bonds go bad, its pointed out, hey tough luck, high risk, high return.

Investors invest using unit trust vehicle because (reasons) and these funds are in turn actively managed by fund managers in line with the objective, strategy, limits and restrictions. So the question begs:

1. was the fund manager and credit analyst asleep at the wheel?
2. was the write-up in the prospectus just for show?; or
3. other reasons?

Had a quick look at the interim report for RHB Income Fund 2 -FYE 30/9/22 (https://rhbassetmanagement.rhbgroup.com/myinvest/client/funds/fund-info?ipdFundCode=INCOME), it is noted that 2 bonds rating were deteriorating. Prior to the deterioration, the bonds may have an acceptable rating. However, once the adverse news appeared in the market, those bonds were essentially as good as waste paper and it was not possible to dispose.

There are also other vitiating factors as well, sweetheart concession deals that were made with the previous government and subsequently taken away by a succeeding government or covid19 had reduced the traffic flow of certain highway that it has caused cashflow issues for certain companies to service their bonds.

There are bonds that are plague by issues that are beyond their contemplation/control and there are others that are downright illegal... the "S" company.

No doubt it is the job of the fund manager is to take reasonable risk to get the desired return but there are just circumstances beyond their control. In any case, I would reckon that fund managers and credit analyst should run a more rigid screening and due diligence process to ensure defaults are mitigated. As managing funds is not a short term sprint but a marathon.

VERY GOOD POINTS

question then as you have pointed out... when did they know... what did they do...

this like the kweb saga all over again...

Way different from KWEB saga 🤦‍♀️ as the KWEB is totally out of the fund manager hands unlike these which are still in their palm

I'm truly amazed that a fucking foreign worker visa renewal company managed to get loans worth hundreds of millions with literally no collateral.

Seriously, I don't feel that our local investment banks fund managers are that great.

kweb - stashaway fund managers sucks... keep buying when kweb is dying... finally sold at bottom...

rhbxxx - rhb fund managers sucks... dunno what they are doing... finally write off...

to me same... managers all sucks...

I had a look at the semi annual report for FYE 30 Sep 22, page 40 "Trustee's Report".

I believe the fund was managed in accordance with the limits and restrictions but the fund had to sell holdings to meet redemption. The result is eventually an over-concentration of junk assets because they are not able to dispose of it because either they have no value.

Sharp observation there.

Sohai managers. Keep DCA without looking at the facts of what's going on. Like that also can become fund managers, any Tom, Dick and Harry also can.

With priority banking is Ok but lesson learned for buying UT and structured investment.

I wish there is space to highlight this and provide information before they buy any.

This post has been edited by Sunshape: Sep 22 2023, 10:02 PM

agreee just look at PRs funds

You mind sharing the product that you purchased?

I think it is unfair to other good fund managers just because this fund did badly, it is like ask others not to invest in stock just because serba did badly

there are many other funds that outperformed benchmark, and it is easier to invest in some markets through funds such as ASEAN and Japan.

I invested in a Japan fund that gave me more than 50% in 1+ year.

Eastspring Investments Japan Dynamic MY Fund - MYR Hedged

https://www.fsmone.com.my/funds/tools/facts...t?fund=MYESJDMY

Actually they do. All the documents they give you to read. Not sure if you read all of them.

Anyway majority of unit trust in Malaysia is losing money over time. That's why I don't bother about unit trust at all.

Overseas unit trust yes some are making money over time.

This post has been edited by Ramjade: Sep 22 2023, 11:00 PM

I’m talking from the context of local fund managers.

principal heritage income fund

they have monthly dividend payout policy but such payout is not from profit but from capital fund.

that is why their NAV keeps on dropping and hence, value of investment if sell off, 36% is gone.

you can see such loophole

then they use monthly payout policy to pancing new investors to masuk, then masuk liao baru tahu sudah jatuh longkang


maybe Bro Raj can open a new thread about products n services from banks so next person wont fall on all.

This post has been edited by Sunshape: Sep 23 2023, 10:49 AM

almost ALL funds will make money...

they also benchmark against own sector... usually show you how well it is doing...

some funds will have golden year 30-50% growth... some continues growing albeit slower, some just die down...

what they all don't tell you... majority CANNOT BEAT EPF over long run... a lot cannot even beat FD...

i was big ut investor >20 yrs... i did have some nice smallcaps, local and regional funds... but overall, i looked back and feel so stupid investing in ut... lol...

problem with local ut... they take big cut... you already lost before getting started...

Got Helang involved, what shit also can be done just to get fund

Yeah. The cut, or kickback together with their annual fund manager fees is for the managers to enjoy themselves in 5 star hotel overseas, with the rest pocket into their own account.

Have to be very selective in investing mutual funds

There are a lot of hanky panky stuffs going on behind the scene I guess.

I too went into Public Mutual fund withdrawing 35k from EPF. Strange that it actually managed to drop 30% about a year or two into it. Not even the dividend (additional units) was able to cover the losses. Just when I was about to give up, covid hit, and guess what. It somehow rebounded and in the end, I still made about 2k++. Withdrew everything never touched these funds again.

My friend who was working with PBB actually make decent money from their own UT. First staff dont have to pay the management fees plus he was friendly with those investing dept guys. So he kinda gets some info on which to avoid.

Oh okay the heritage series. My 2cents only, do correct me if I am wrong.

The heritage income is basically a feeder fund that feeds into Fullerton SGD Income Fund (Target Fund). It is required to invest 95% of its NAV in the target fund and remaining may be used for liquidity purposes. The management fee can only be charged once to the unit holder namely either on feeder fund or target fund. There is no benchmark for this fund because its not a mandatory requirement (also they have removed this requirement for retail funds as well).

For target funds especially those establish as a UCIT fund in Europe i.e. in Dublin or Luxemburg, it's common for funds to distribute out of capital. It's not a loop hole especially for feeder fund and on top of that you are suppose to be a sophisticated investor to invest in a wholesale fund.

In Malaysia, the regulators have also relax provisions (however additional disclosures required) to enable distribution out of capital.

In your case, I had a quick glance of the annual and semi annual report for both feeder and target fund, I didn't note that there was any payment made out of capital. IF someone see any indication, do let me know. The fund seem to have exposure in Asia (I think Asian fixed income aren't all that hot right now) and some in China as well and some real estate. That probably explain some of the erosion in the performance of the fund.

I think foreign source income may also have an impact on the income derived abroad but do check with your RM on that as well.

Quite interesting fund.


I think ultimately depends on a lot of factors, like fund manager (same fella who has been managing the fund for 10 years+), changes in regulatory or law (example introduction of 30% WHT by US or Foreign Source Income), thematic funds (tech fund, becomes obsolete with AI) etc...

Each fund goes through a particular cycle but if you are just plain lazy (like me) haha... probably go for conventional strategies like Growth, Balance or Income, let the fund manager asset allocate throughout the economic cycle but be mindful if you intend to go geographic, thematic or instrument specific.

Quite informative but if distribution is on monthly profits but still NAV drops significantly, what do you see?

If you are making profits and you can distribute monthly, NaV value should be maintained... u know i know

It had been told and discussed previously in lyn...
For UT, after the distribution , the NAV of the fund will drops

definitely will drop to equilibrium.

but this fund is otherwise

nvtl, i also lazy to point out but 100% is Sukuk type

You have to put UT or any investment in some prospective ….if u have bought it when it has dipped by 30% and sell it have it when it has risen, you would have made about 50%.

But then the next question will be, would other investment would have performed the same, better or worst….if it follows KLCI index or whichever country stock index the UT is based on, performance the same then the UT is really nothing special……that’s why some of the best guru in the world just recommend SP500 low cost index fund.

Beating the average is just hard.

Different 🤦‍♀️ SA is buying and riding on KWEB during the pandemic and they would have make money 🤦‍♀️ but because of greed and hodling if they would have sell it at the peak during Feb 2021

RHB is the case where left hand issuance as LA/FA while getting the RHBAM to hold bag on the right hand 🤦‍♀️ so it is 2 different cases whereby RHB is internally cycle from issuance to holding to zeroise without any outside holdings or tradings

1stly you cannot compare as this would feeder fund not directly managed fund by the fund manager itself 🤦‍♀️ plus only the past year most Japanese have been performing but not in the past 40 years since the late 80s 🤦‍♀️ so don’t compare that way as 1 year is just anamoly for the past year but not performing this year

How about this fund?

KAF Core Income Fund

https://www.fsmone.com.my/funds/tools/facts...t?fund=MYALOINF

Very Bursa heavy funds but so far past few 3 years been performing but on longer term for 10 years not that promising

You need to do your research whose is the fund manager executing its strategies