Best and worst funds of 2010

Source : (31 January 2011)
Best and worst funds of 2010

KUALA LUMPUR: 2010 was the year for emerging markets, Malaysia included. As expected, equity trumped bonds and local funds outperformed global ones. Funds invested in local stocks outperformed with eight Malaysian equity funds occupying the list of Top 10 performing funds for 2010 (see below).

The top-performing fund for the year was Public SmallCap, which saw an increase of 32.82%, a gain that pales in comparison with the increase of 104% for the best returning fund of 2009. But funds are not designed to be held for just a year and investors are advised to evaluate a fund based on its performance over a longer-term period.

“Public SmallCap benefited from an extremely low interest rate environment, which encouraged investors to adopt a more generous appetite for risk. None of the top 10 performing funds were syariah-compliant as the lower risk-reward profiles of these funds led them to underperform their conventional peers,” says Ivan Ng, research analyst for Lipper.

According to Public Mutual’s fund report for November 2010, the fund invests 60% of its net asset value (NAV) in local equities and the rest is invested in China, Singapore, Indonesia, Thailand, Australia and South Korea. Its top five holdings were Media Prima, Manulife Holdings, KrisAsset Holdings, Unisem (Malaysia) and Time DotCom.

Half of the worst performing funds for the year were global equity funds. The worst performer, CIMB-Principal Climate Change Equity, is a thematic fund that fell 17.14%.

“Climate change stocks faced difficulty in the last three years and were avoided as investors believed governments would no longer have the money or commitment to tackle climate change due to the global financial crisis. This was further exacerbated by the poor results of the Copenhagen Climate Change Conference in December 2009, which caused climate change strategies to generally underperform the broader global equity market,” explains Raymond Tang, chief investment officer of CIMB-Principal Asset Management Bhd.

Says Ng, thematic funds that were launched before the financial crisis of 2008 lacked investor interest and have not performed well in Malaysia and other markets.

With the ongoing debt problems in the eurozone, funds invested in the region were also among the worst performers.

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