Unit trusts rocked in 1H2010

Around 36% of unit trust funds offered here ended the first half in the red, with an average 1.1% loss in a period in which the MSCI World Index fell more than 10% and the MSCI Emerging Markets Index lost 6.1%. The “safe haven” among equities turned out to be in the home ground, with Equity Malaysia eking out a 3.6% average gain for period. Indeed, the top-performing funds were dominated by equity Malaysia funds. Other funds that stayed in the black were from the more conservative asset classes of bonds, money market and protected.

Funds invested in European equity and real estate were the worst hit, as concerns over the economies of Greece, Spain and Portugal rage on. Both categories averaged losses of more than 20% in the six-month period. Meanwhile, commodities, beset by worries over global growth and China’s economy, slumped the most in almost a decade as oil dropped 4.7%. Gold, bucking the trend, climbed 13% in the first half.

Overall, fund managers are entering the second half in a cautious mood as markets grapple with the issue of growth, governments’ austerity moves and volatility arising from the European sovereign debt crisis and monetary policy. Robbin Khoo, CEO of InterPac Asset Management Sdn Bhd, said: “Overall, we do not foresee much activity in the equity market until near the end of the year. Selective stocks are still providing the momentum for the domestic market, and we continue to see value in some of the mid- and big-cap stocks.”

He said two of InterPacific’s funds did well in the first half due to a restructuring of the fund portfolios, the raising of risk exposure and stock selection.

A Reuters poll showed that fund managers remain cautious, taking equity exposure to its lowest level in well over 1½ years. A survey of 48 leading investment houses in the US, continental Europe, Britain and Japan showed average equity holdings in a mixed asset fund falling to 51.8% in June, from 52.3% in May.

According to the Reuters report, however, the data — including the moves into high-yield bonds — also suggested that investors have not caved in to fears of a double-dip recession as managers retained a modest overweight in equities and an underweight on both bonds and cash.


This article appeared in The Edge Financial Daily, July 15, 2010.