INTRODUCTION

As we all know, the number of unit trust companies in Malaysia is increasing year by year, since 1981 when the Skim Amanah Saham Nasional was launched by Permodalan Nasional Berhad (PNB). At that time, only 11 fund being launched and the total units subscribed by the public swelled to an unprecedented level because of the overwhelming response to Amanah Saham Nasional (ASN)

Amanah Saham Nasional Berhad is the Management Company of ASN, ASN 2, ASN 3, ASG Pendidikan, ASG-Kesihatan, ASG-Persaraan, ASB, ASW 2020, ASM and ASD, a wholly-owned subsidiary company of Permodalan Nasional Berhad (PNB).

ASNB was established on May 22, 1979, to manage the unit trust funds launched by PNB. Having been in the industry for more than 25 years, ASNB has confirms to maintain its position as a leading unit trust manager, controlling more than 40% of the total units in circulation.

The vision and mission of Amanah Saham Nasional Berhad are same with Permodalan Nasional Berhad which are “We will be a world class investment organization, distinctive and successful in everything we do” and “We are a premier investment organisation committed to enhance the economic wealth of the Bumiputera community in particular and contribute towards the growth and prosperity of the nation for the benefit of Malaysians”.

What is unit trust? A unit trust is a collective investment scheme which pools the savings of the public into a special unit trust fund managed actively by professional fund managers. A unit trust fund is constituted pursuant to a deed executed by the trustee and the manager on behalf of unit holders. The Deed is registered with the Securities Commission and sets out the rights of you as a unit holder and the responsibilities and liabilities of the trustee and the manager. The unit trust fund will invest in equities, fixed income securities and other assets authorized under the Guidelines.

In some countries, unit trust also known as mutual funds. In the United States, unit trusts are known as mutual funds whereas in other countries they are better known as unit trusts. The difference lies in their legal structure, namely mutual funds are investment companies that issue redeemable shares whereas unit trust is a limited liability company that issue unit instead of shares (Securities Commision).

The return on investment of unit holders is usually in the form of income distribution and capital appreciation, derived from the pool of assets supporting the unit trust fund. Each unit earns an equal return, determined by the level of distribution and/or capital appreciation in any one period.

Unit trust investors are typically those with savings to invest, who neither have the time nor the inclination to hold portfolios of direct investments or shares. Rather, they prefer to invest in a secure, reputable investment vehicle which suits their purposes. Unit trusts allow investors to have easy access to a wide range of investments not normally available to them.

As investors seek to maximize returns on their financial resources, unit trusts provide an ideal way for them to gain exposure to investments that, in the long run, should produce returns superior to cash savings and fixed deposit investments.

So, for this study we will investigate the linkage between the performance of ASNB with the macroeconomic variables such as interest rate, Gross Domestic Product, inflation rate, and unemployment rate for ten years from the years 2000 to 2009.

BACKGROUND OF THE STUDY

In making better judgment whether to buy or to sell or to switch between funds, investors need to know the factors that affect their funds return. The ability to predict would enhance the investors’ confidence and increase the ability of fund managers to provide better understanding of the mutual funds industry to potential investors.

The purpose of the study is to investigate the linkage between the macroeconomic variables and the performance of unit trust in Malaysia for ten years from year 2000 until year 2009. The factor of determining the performance of unit trust in Malaysia are include the macroeconomic variables which is interest rate, gross domestic product (GDP), inflation rate and unemployment rate.

TYPES OF UNIT TRUSTS

1.3.1

Equity Funds

Equity unit trust funds are popular in Malaysia as they provide investors with exposure to the companies listed on Bursa Malaysia. The performance of the units is therefore linked to the performance of Bursa Malaysia. A rising market will normally give rise to an increase in the value of the unit and vice-versa.

There is a wide array of equity unit trusts, available in the market, ranging from funds with higher risk, higher returns to funds with lower risk, lower returns.

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Aggressive growth funds

These funds invest generally in companies with higher capital growth potential but with associated higher risk

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Index funds

These funds invest in a range of companies that closely match (or “track”) companies comprising a particular index.

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International equity funds

These funds invest primarily in overseas share markets.

1.3.2

Fixed Income Funds

These funds invest mainly in Malaysian Government Securities, corporate bonds, and money market instruments such as bankers acceptance and fixed deposits. The objective of a fixed income (or bond) funds is usually to provide regular income, with less emphasis on producing capital growth for investors. It is possible, however, for fixed income funds to generate both capital gains and losses during a period of volatile interest rate.

1.3.3

Money Market Funds

Money market funds operate in a similar way to a bank account-the unit price is normally set at a fixed amount. Money market funds invest in low risk money market instruments that are in effect short-term deposits(loans) to banks and other-low risk-financial institutions, and in short-term government securities.

1.3.4

Real Estate Investment Trusts (REITS)

REITs invest in real properties, usually prominent commercial (office) properties and provide the investor with an opportunity to participate in the property market in a way which is normally impossible to the small time investor. By acquiring units in a listed REITS, however, it is possible to invest a small amount to gain exposure to the property market and have diversification in your portfolio.

1.3.5

Exchange Traded Funds (ETF)

ETF is linked unit trust fund whose investment objective is to achieve the same return as a particular market index. ETF often have low expense ratios and can be bought and sold throughout the trading day through a stockbroker, on an exchange.

1.3.6

Balanced Funds

Some investors may wish to have an investment in all the major asset classes to reduce the risk of investing in a single asset class. A balanced unit trust fund generally has a portfolio comprising equities, fixed income securities, and cash.

1.3.7

Syariah Funds

Syariah funds will exclude those companies involved in activities, products or services related to conventional banking, insurance and financial services, gambling, alcoholic beverages and non-halal food products. The main objective of Syariah funds is to provide an alternative avenue for investors sensitive to Syariah requirements.

Sources from: http://www.asnb.com.my

HOW UNIT TRUST FUNDS WORKS

Sources from: http://www.asnb.com.my

BENEFITS OF INVESTING IN UNIT TRUST FUNDS

For an individual to maintain his own portfo