I believe as long as the fund has spare cash, they can declare dividend. Companies/funds are not required to be profitable in order to distribute dividend. Maybe funds cannot declare dividend easily as compare to companies of which can stil. borrow from banks for the purpose of giving "dividend".

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Added on October 10, 2010, 6:23 pmBelow is the comparison between the P.Itikal fund and its benchmark:-

P.Itikal total accumulated return for the last 5 years
= [(1+12.91%) * (1+46.13%) * (1+2.98%) *(1-16.07%) * (1+14.25%)] - 1
= 62.93%

Benchmark total accumulated return for the last 5 years
= [(1+7.12%) * (1+48.04%) * (1-1.95%) *(1-19.04%) * (1+16.35%)] - 1
= 46.45%

P.Itikal average compounded annual return for the last 5 years
= [(1+12.91%) * (1+46.13%) * (1+2.98%) *(1-16.07%) * (1+14.25%)]^(1/5) - 1
= 10.26%

Benchmark average compounded annual return for the last 5 years
= [(1+7.12%) * (1+48.04%) * (1-1.95%) *(1-19.04%) * (1+16.35%)]^(1/5) - 1
= 7.93%


Apparently, P.Itikal outperforms its benchmarkt by 2.33% (=10.26% - 7.93%), which can be consider as a good return. But I would like to know what is the benchmark for P.Itikal? Is the P.Itikal's return stated in the report net of fees or gross of fees?

This post has been edited by kinwing: Oct 10 2010, 06:24 PM

Since no one can get me more detail about the return is net of fees or gross of fees, so I hereby make my own assumption. I assume the P.Itikal's returns stated in the report are gross of fees, thus I'm doing the return net of fees as show below:-

Assumption
P.Itikal's initial up front charges = 5.5%
P.Itikal's annual management fees = 1.5%

P.Itikal total accumulated return for the last 5 years (net of fees)
= [(1-5.5%) * (1+12.91%-1.5%) * (1+46.13%-1.5%) * (1+2.98%-1.5%) *(1-16.07%-1.5%) * (1+14.25%-1.5%)] - 1
= 43.61%

P.Itikal average compounded annual return for the last 5 years (net of fees)
= [(1-5.5%) * (1+12.91%-1.5%) * (1+46.13%-1.5%) * (1+2.98%-1.5%) *(1-16.07%-1.5%) * (1+14.25%-1.5%)]^(1/5) - 1
= 7.51%

By taking the fees factor into account, instead of outperforming the benchmark by an average of 2.33% each year, P.Itikal is underperformed the benchmark by -0.42% (=7.51% - 7.93%)each year. Some might have made a call we should buy funds with timing strategy, I would say why don't we replicate the benchmark by our own effort or buy index fund with timing strategy instead of relying mutual funds which charge us gaogao?

This post has been edited by kinwing: Oct 11 2010, 01:03 AM

It's unethical for an agent to assume/project returns when promoting a fund. Indeed it always be indicated in the promotion brochure that "Past return does not guarantee it will repeat in the future" .

Many UTs set to follow a low standard benchmark, maybe benchmark against some "Burma" or "Bangladesh" indices, who knows? Moreover, some of the indices are not even investable! Then we would know how low class for some of the UTs then.

The Public Ittikal fund was gaining approximately 40% from Jan 2009 to Aug 2010. So how about it's benchmark's return during the said period? Have Public Ittikal outperformed it's benchmark during the period then?

Since I wrote about a topic that related to a fund in the "Personal Financial Management" of which I think the topic is relevant to fund management, so just copy it to this fund section.

"Since some of you are so keen into investment, maybe I can recommend you to have a look on this close-end fund, i.e. icapital.biz berhad. This fund is listed on the main board of Bursa Malaysia. This fund was launched since 19-Oct-2005 with a NAV per share of RM1, it does not pay any dividend but it's NAV per share is about RM2.47 today. This fund is investing Bursa Malaysia whereby only no more than 10% of its fund should be put into unlisted companies in Malaysia.

Since this fund does not pay any dividend, we can use the money weighted average return method to calculate it's return. As it's fund NAV per share grows from RM1 to RM2.47 since last 5.04 years (which means if you put in RM10,000 into the fund 5 years ago, it would have doubled your wealth to be RM24,700 today), the fund's return on the NAV is shown below:-
NAV average compounded annual return (for 5 years) = (RM2.47/RM1)^(1/5.04) - 1 = 19.65%

Some of you might claim that close-end fund will not be traded at it's NAV because it's a norm for a close-end fund to be traded in discount, then we can look at the ICAP's return base on its share price (which is around RM2.04 now) to get the ROI as stated below:-
ROI average compounded annual return (for 5 years) = (RM2.04/RM1)^(1/5.04) - 1 = 15.2%

IMHO, I think a fund with the return of 15.2% each year is quite good, and it bits the KLCI benchmark quite handsomely. Of course, we should not only look at the return but also the risk side. This fund is investing shares in Bursa Malaysia, so it's NAV and share price could be volatile. In order to make profit from this fund, investors should plug in money in this fund for long term. Let say if an investor put in money 5 years ago and sold 3 years later at 2008/2009, he can only makes an annual compounded return approximately at 6.3%, if wait another 2 more years he can make a higher profit.

You can find out more about this fund from the ICAP's and Bursa website with the links stated as below:-
http://icapital.biz/english/
http://www.bursamalaysia.com/website/bm/li...ments/index.jsp

BTW, I hereby disclaim that I'm the shareholder of ICAP, so anyone who invest in ICAP now could have positive impact to the share price and this could indirectly benefit me...

Below is the attachment that showing the performance chart and table of this fund. "




Attached thumbnail(s)

Let me post something about the difference in between open-end fund and close end fund.

In order to encourage investors to be long term shareowners for a fund, the fund can impose several restrictions to the fund such as 1-year lock in period, 2-month disposing notification period and close-end units. So ICAP decided to setup the fund with a close-end basis. The subsequent paragraphs I would like to differentiate what is a close-end fund (“CEF”) and its different to an open-end fund (“OEF”).

A CEF is set up as a company under the Companies Act and is generally listed on a stock exchange. CEF has a fixed number of shares outstanding and its capital is raised through an initial public offering (“IPO”) like any other public offerings. Investors who buy the shares of a CEF will become shareholders of the company. Like all other publicly traded securities, shares of a CEF are bought and sold in the open market. Its share price is determined by supply and demand in the marketplace.

Whereby the OEF, or more commonly in Malaysia it is so-called the Unit trust funds (or in the US it is mutual funds) which is not incorporated as a company but as a trust where monies are collected from investors to be invested and managed for investors' benefits. OEF’s units are first offered through an IPO. However, OEF units will vary even after the IPO. As the unit holders of OEF are still able to buy or sell theirs from/to the OEF, and the OEF is responsible to issue new units for buyers and cancel its existing units to liquidate cash in order to meet the unit holder’s redemption. Sometimes, some of the fund mangers of certain OEFs claimed that their fund size have increased a lot during a short period, however please take note that the increase of the fund size not necessary because of the fund manager’s ability to achieve superior return but just merely indicates that there are more units being issued.

In view of the abovementioned difference in between CEF and OEF, I would like to point out the one of the most important advantages that CEF consists is the professionalism of fund manager is retained much better than OEF.

Why we want to invest a trust fund? The most common pitch used by trust fund is that it allows the man in the street to enjoy professional fund management. However, due to the open-end structure of an OEF, the investment decision making is indirectly made by the retail investors, not the professional fund manager. Investors themselves end up being the one controlling the buying and selling of the fund's portfolio, not the fund manager.

When the stock market is bullish, investors tend to flood new monies into OEFs. When this happens, the OEF receives an inflow of cash and needs to invest the monies received based on their investment mandate. Thus, investors are 'forcing' the fund managers to invest, even when some of the shares are trading at high valuation. In a bear market, investors tend to panic and start to redeem or sell their units. Fund managers of the OEF have no choice but to liquidate their portfolio to raise cash to pay the investors who sold or redeemed their units. Thus, investors 'forced' fund managers to sell when the stocks may be trading at attractive valuation. Once the fund managers are ‘forced sell’ the stocks, it will trigger another round of market crashing and investors will be more panic and selling/redeem more units. So it is just a circle of market crashing, panic, selling and market crashing again. In short, the fund managers of OEF are dictated by the emotions of unit holders who are tend to be more in short-term tenure, and thus eliminating the benefits of professional management and long-term investing.

On the other hand, the buying or selling activities of the unit holders of CEF will not affect the investment decision of the fund manager once the fund listed. If any potential investors would like to buy the CEF’s units or any existing investors would like to dispose the CEF’s units after IPO, they can trade to buy/sell the CEF’s units at the secondary securities market such as Bursa Malaysia, and the CEF is not responsible to any of these trading activities. This is the reason why CEF is required to be listed at a secondary market for the ease of trading the units. Thus, the fund manager of CEF can efficiently utilise the proceeds from the investors for long term investing and buy more units during bear market with cheaper valuation and selling more units during bull market with higher valuation without disturbances from the trading activities carry by the unit holders. This is one of the reasons that CEF can outperform OEF in term of investment return.

madstone,

You know little about investment and 20k is not much. Keep these $ in FD till you know more what you are talking about.

You buy a close-end fund at a cheaper market price as compare to it's NAV cannot guarantee you make a profit immediately. You only realise the profit when you buy at cheap and sell at higher price. So you can indeed take the advantage from buying at a discount. Let me show you an example below.

Currently ICAP's NAV is RM2.49, it's market price is now RM2.06, which represents a discount of 17.3% to the NAV. So assume next year the NAV increase 10% till RM2.74 (=RM2.49 * 1.1). The market price could be traded on par to its NAV instead of discount, then it's return in one year will be 33% (= [2.74/2.06] - 1). You would be indeed doing better than the ICAP's fund manager (33% Vs 10%).

Some of you might think why suddenly ICAP would be traded on par with it's NAV since it has been traded in discount all these while. For you information, the previous 3 years when ICPA listed in Bursa (end 2005 till mid-2008), it was traded in premium (the highest premium was about 25% to 27%, with a NAV of RM2.2 BUT traded at RM2.8). It was then traded in discount soon after the financial crisis since end-2008 till today, it is just same as half of the listed companies in Bursa which traded in a market price below their NTA/NAV. So for those who believe the world economy is recovering stronger in the next few years would predict the share markets doing well and thus a lot of shares will be traded either on par or premium to their NTA/NAV and ICAP's shares could be one of them.

Even I should not be over-confident that ICAP's shares to be traded on par or even premium to its NAV, at least I can assume its discount should keep unchange, not widening during bull market. Then the market price of ICAP will increase in tandem with the NAV. For example if NAV would be RM5 (which mean NAV grows by double from the NAV of RM2.49 now) in the next few years, the market price should be only traded at RM4.14 (=[5 * (1-17.3%)], which mean the ROI for the investors is 100% as well if investors buy the share price of RM2.06).

Please remember the price is what you pay but the value is what you get.

This post has been edited by kinwing: Nov 6 2010, 04:20 PM

Extract part of my previous writting from my blog match your query

"...The 3rd reason I invested into ICAP at listing as I thought ICAP was launched at a right timing. As there were used to be only 2 stocks listed under the closed-end fund section - ICAP and AMANMFB. Amanah Millenia Fund Berhad ("AMANMFB") was listed as a closed-end fund at wrong time at year 1997 before the KLCI index was crashed to a low during the Great Asian Financial Crisis at year 1998. It was a stupid decision to launch AMANMFB (just like many of the existing conventional open-end unit trust fund always launched at a wrong timing) at an all time high as the KLCI index was traded at a P/E of 20 times. So coming through the Great Asian Financial Crisis, the performance of AMANMFB was very lousy and decided to close shop at year 2007. At the time the fund was liquidated after lasting 10 years, it only created an accumulated growth of 20% to its shareholders. So the CAGR of AMANMFB in last 10 year period from 1997 to 2007 was only 1.84% (=1.2^(1/10)-1)! If I was the shareholder of AMANMFB, I would rather put the money into the bank that could earn me a fixed-deposit rate that higher than 1.84% every year.


Whereby ICAP was listed at a mild bear market of which the KLCI index was traded at a P/E of 12 times at year 2005. It was because the investment strategy that the fund manager of ICAP employed was value investing. By launching the fund at a right time, the fund was able to use excessive cash to shop at the "Bursa" complex and acquiring shares at a bargain price. This reminds me what Warren Buffet has mentioned that "Be fearful when others are greedy, and be greedy when others are fearful". By contrasting the poor performance of AMANMFB with the bright side of ICAP, it boosted more confident for me to invest into ICAP."

So? Its price has been increasing in the last few weeks. And everyone including ICAP dropped during the next few days, we call this phenomenon as "fluctuation".

Mind to share with us what you find about Unit Trust before we do more input to you query? Don't expect us to spoon feed you word by word if you don't contribute in the discussion.

For my opinion, Indonesia is the most potential one, the 2nd most potential should be Thailand, whereby Philippines is last.

'KLSE stocks effective minimum lowest cost % = RM4K+/- per transaction'...Looks like you got a very attractive rate close to 0.3% or RM12 (RM4k = RM12/0.003)

Btw, for those who would like to have diversification with cost effective via collective pool of funds, why not aim for index funds instead mutual funds? The management fees for index funds are much more lower than mutual funds.

Mine online trade fees are 0.1% or RM8...I think the 'Malacca Securities' offered as low as 0.001% .