Off the Timing, as Usual

After three months,Permodalan Nasional Bhd (PNB) finally found it fit to clarify the few disturbing misconceptions on its new product, Amanah Saham 1Malaysia (AS1M). The statement touched on the distribution method, direct fees and charges, as well as the performance benchmark.

In Kuala Lumpur yestersay(2 December 2009), PNB finally found dutch courage to explain some gray areas of the 10 billion-unit fixed price fund of RM1 per unit that was launched in August for all Malaysian individuals, starting with a minimum initial investment of 100 units.

'Idris Kechot,deputy president of Unit Trust told the public that subscribers were free to cash out or sell their units at any time and still be entitled to the annual dividend payment based on the retained units.

“The method of distribution is based on the average sum of the minimum monthly balance of the units during the distribution period. AS1M is a fixed-price fund unlike other price-varied funds that are based on net asset value of the funds,” he told a media briefing yesterday. [This is a comfort aspect as the price would not decline below par.]

Idris said Amanah Saham Malaysia Bhd also had not imposed any sales charge on all its fixed-priced unit trust funds, including AS1M, although the latter’s prospectus stated a sales charge of up to 1% of the invested amount was applicable.[PNB should have clarified this in an errata or addendum to promote more sales which it did not.]

AS1M also did not impose any redemption charge and it had no maturity period, he added.

In terms of performance benchmark, Idris said AS1M was based on average five-year Malaysian Government Securities (MGS) yield as opposed to three-month Kuala Lumpur Interbank Offered Rate that was used in Amanah Saham Wawasan 2020, Amanah Saham Malaysia, Amanah Saham Bumiputra and Amanah Saham Didik.[The three-month Kuala Lumpur Interbank Offered Rate could be higher when BNM increased its overnight inter-bank rate which may be sooner than later if the economy improves.]

“Average five-year MGS yield is a more suitable benchmark due to its objective as an income and a long-term investment fund. Also, the rising inflation environment needs a higher benchmark in order for our unit holders to maintain their ‘real’ rate of return on investment,” he said.[Do you feel this is true?]

AS1M, which has an allocation of 50% for bumiputra investors, 30% for Chinese, 15% for Indians and the remaining 5% for other ethnic groups, has sold some 2.8 billion units. Idris said the decision to uplift the quota would be made before Dec 31.[70% of the Chinese quota has been taken up. The other racial quotas are sadly ignored.]

PNB – the investment manager of nine Amanah Saham trust funds – has seen tremendous growth this year that is translated into 700,000 new subscribers year-to-date compared with 500,000 last year despite the challenging economic climate.

“And the total investment up to October this year was at RM17.8bil compared with RM12bil for the whole of last year,” Idris said.'

Reading this piece of news really creates a bad taste in the mouth. Why is PNB in a passive mode even when the sale of PM Najib's much touted AS1M is fraying at the edge? Also, isn't it obvious that the quota uplift by December 31,2009 will not change the status quo?