THE COMPARISON OF PERFORMANCE OF ISLAMIC AND CONVENTIONAL UNIT TRUST FUNDS IN MALAYSIA Academic Essay

THE COMPARISON OF PERFORMANCE OF ISLAMIC ANDCONVENTIONAL UNIT TRUST FUNDS IN MALAYSIA1.0 INRODUCTIONA unit trust is an investment scheme that pools money from many investors who sharesimilar financial objectives, investment strategy and risk tolerance (Choong, 1970). The pooledmoney will then be invested in a diversified portfolio of authorized investments by aprofessionally managed organization on behalf of the unit trusts investors. An independenttrustee is appointed to oversee the management of unitholders money. Thus, the rights andinterest of investors in unit trust are safeguarded. The unit trusts are also called open-endsfunds as the unitholders can redeem or sell back their shares through the fund managementcompany at the prevailing buying price or current market values. Unit trust fund is an affordableavenue for investors to achieve a reasonable level of diversification. With the introduction ofsector funds in Malaysia since 19591, investors are offered an alternative in making investmentdecisions.Unit trust also plays a very important role in Malaysian capital market. They are amongthe major players in the market and believed to have the influencing power to attract smallinvestors to capital market (Leong, 1997). It is more appealing and provides a wider investmentbase for small investors. Consequently, this has created intense competition among the unit trustfund management companies in the unit trust industries. As such, more innovative unit trustproducts have been developed and introduced in order to attract potential investors.In view of the growing demand from Islamic investors, the Islamic unit trust funds wereintroduced in the mid 1990s. Tabung Amanah Bakti, launched in May 1971, was the pioneer ofIslamic unit trust with Asia Unit Trust Berhad as its fund manager. Over the years, despite thevolatile market, the Islamic funds managed to grow 102% from a small base of RM 834 millionin 1995 to RM1.6 billion in 2000 (Smart Investors, May 2002). As at September 30th, 1998, therewere thirteen Islamic unit trusts in operation. This figure has increased to twenty in June 2002and thirty four in February 2003 comprising mostly of equity funds and several bond funds (TheEdge, February 24th, 2003).1 The history of trust funds in Malaysia dated back to the establishment of the Malayan Unit Trust Limitedin 1959 (Bankers Journal Malaysia, February- March, 1995).21.1 OBJECTIVE OF THE STUDYUnit trust industry has been the subject of study by many researchers in the past. InMalaysia, studies in the industry has started in the 1990s such as Mohamed and Mohd Nasir(1995), Tan (1995), PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT

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