I refer to the letter Unit trusts a gamble . I agree to a large extent with what the writer has said. There are good fund managers out there but these fund managers do not show their performance by outperforming the KLCI. Rather they bank on Net Asset Value (NAV) over a time horizon.

An example of the KLCI illustration is my investment in Public Mutual which lost 10 percent (20 percent if the fees are included) over four years despite the fund managers claiming that they outperformed the market every year.

It doesn't make any sense that a professional fund manager can make losses having claimed to have outperformed the KLCI..

Indeed the industry must be re-organised by the authority on the following parameters:

  • The initial service fee of 6.5 percent and the management fee 1.5 percent are too high as this means that an investor has already lost eight percent of his money before seeing any return in the first year. These first-year fees should be capped at three percent at the most.

  • The annual flat management fee of 1.5 percent should not be allowed, but should be based on performance where the higher the return on the NAV of the fund, the higher the annual fee for the fund manager. This is to ensure that the fund manager works hard and invests carefully on behalf of his/her clients. If returns are negative, the fund manager should not be paid a fee.

  • Funds should not allowed to camouflage their performance against the KLCI. Instead, the performance should be based on the NAV on a year-to-year basis, meaning on absolute returns after deducting management and service fees.