As at March 31, there were 37 management companies (MCs) managing 253 funds, an increase of 27 funds from one year ago.

The noble idea of encouraging people to invest in a collective investment scheme is getting too sophisticated with the one too many products being offered ranging from pure equity, balanced, Islamic, bond, capital guaranteed to investment linked.

The public is just overwhelmed without knowing the basics. My survey of many of the funds' annual reports indicate the following:

  • Most equity-based funds are primarily invested in the top 10 Kuala Lumpur Composite Index (KLCI) counters and thus merely mirror image the performance of these counters.

  • Most funds use the KLCI as the sole benchmark for their performance. Thus allowing poor performances to be always blamed on the KLCI when fund managers should have better foresight.

  • Though allowed to invest overseas, none of the funds have significant exposure abroad and therefore miss out on the regional upturns.

  • Annual management fees charged averages 1.5 percent of the net asset value per annum, What this means is that if a fund is valued at an average of RM100 million in the year; RM1.5 million is payable to the MC as management fees.

  • Service charges ranging up to 6.5 percent are charged up front. Not many realise that a unit trust investor will incur an immediate (and painful) 6.5 percent loss with his/her investment.

    • My father, who is against unit trust funds, says: "Why should I let fund managers manage my money for me? Despite lacking in business and finance knowledge, I can just invest it by myself and outperform the KLCI anytime."

    I agree with the second statement. It is now much easier to invest directly in the stock exchange since the minimum one broad lot has been reduced from 1,000 shares to 100 shares, thus diminishing the need for unit trusts to diversify our investments.

    I have known many who have consistently gained via 'disciplined speculation', thus diminishing further the need for slower moving unit trust schemes where performances are not guaranteed.

    I believe there are now too many players offering similar products and would not be surprised if a round of mergers and acquisition will soon be necessary.

    What the unit trust industry is lacking is consistent superior performance (not only against one benchmark) and convincing consistent above average returns. After all, these fund managers should have a better crystal ball than ordinary folks. Not forgetting the fees they charge which can be lowered significantly.

    The above arguments hold water as we have heard of the dismal performances of state unit trust funds while many private unit trust funds are still struggling to recoup capital loss resulting from the 1997/8 financial crisis and the mild recession in 2001.

    Many are just not ready to switch from the time-tested fixed deposits to unit trusts. We certainly are not ready to be overwhelmed by the deluge of unit trust funds and products offered.