Amanah Saham 1Malaysia, a new fixed-priced-fund by PNB was launched yesterday. And I found that a lots of people feel uncomfortable with the "fixed priced" policy.
"How can the redemption price be fixed at RM1 while the NAV is fluctuating?"
(Just wonder why nobody ask the same questions on EPF. They work the same way too. Each dollar you put into your EPF account, plus dividend each year, can be withdraw with no risk of loss. Isn't it true that the NAV of EPF funds also fluctuate with the market? )
Seems that people may feel better if they know the NAV of those fixed-price-fund. So, this article suggests a method for estimating those NAV.
Although the NAV is not disclosed in the fund's annual report, it can be estimated indirectly through the following steps:
- First, you can find a list of its 20 largest holdings from the fund's annual reports, together with their weights in terms of % of Total NAV.
- Then, look for the annual reports of those companies. You should be able to find out the number of the company's shares that are held by the ASN's fund.
- Find out the share price of the stocks on the balance sheet date of the fund.
- Multiply the term-2 and 3 above, you'll get the market value of the company's share held by the fund.
- from the term-1 and 4 above, the NAV of the fund can be calculated.
- divided the NAV by the unit in circulation, you get the NAV per unit.
That's it.
.
For illustration, I had done some calculation on ASW2020.
Example 1:
- According to ASW2020's 2008 annual reports, Maybank accounted for 7.77% of its total NAV on 31-Aug-2008. (financial year end).
- From the annual reports of Maybank, we know that ASW2020 held 76.5 million shares of the company.
- The share price of Maybank at 31-Aug-2008 was RM7.85.
- Thus, the ASW's holding on Maybank worth RM600.5 million on that date.
- So, the NAV of ASW = RM600.5 / 0.0777 = RM7.73 billion.
- divided by the unit in circulation, 7.795 billion, we have the NAV per unit = RM0.99.
Example 2:
- According to ASW2020's annual reports, Tenaga accounted for 6.60% of its total NAV at 31-Aug-2008.
- From the annual reports of Tenaga, we know that ASW2020 held 66.5 million shares of the company.
- The share price of Tenaga at 31-Aug-2008 was RM7.90.
- Thus, ASW's holding on Tenaga worth RM526 million on that date.
- So, the NAV of ASW = RM526 / 0.066 = RM7.97 billion.
- divided by the unit in circulation, 7.795 billion, we have the NAV per unit = RM1.02.
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There are always some errors in the calculations. Some possible causes are:
- The financial year end of ASW and the holdings company are different. Thus number of share held by ASW reported in the companies's annual report may be different from the figures in ASW's report.
- The market values in ASW's report may be recorded using average price of the last few trading-days of its financial year end, instead of the closing price on 31-Aug. (need clarificaton here...)
5 comments:
Good job. But that does not explain the consistent superior yield for PNB funds held mostly by Bumi, of course, some for non Bumi.
The issue is, why and how did they get such superior results and yet can maintain its fixed capital of RM1 per unit.
If PNB fund managers are so good, wouldn't it make sense for all private mutual funds to be run be PNB fund managers?
yauwenchin...
according to historical data, PNB's fixed-price funds (ASB, ASD, ASW2020, ASM) only give an average return of 7% - 8% p.a.
I don't understand why all people call this a "superior" return. Many private mutual funds outside there can easily give a return higher than this. (pls compare PNB's fixed-price-funds with an equity fund outside, not a bond fund.)
The only different is, other unit trusts are being sold and bought back according to their NAV, while PNB's fixed-priced funds are always sold and redeemed at RM1.
PNB didn't maintain those NAV at RM1. The NAVs will always fluctuate, and can be well above or below RM1. They just fix the buy/sell price at RM1. So, sometime you buy or redeem the unit above its NAV, sometimes below it. Over the long term, the positive and negative effect will smooth out.
Generate 7-8% return risk free in PNB is high compare to fixed income fund/bond but certainly unattractive compared to equity fund. Over the longterm, top quartile equity fund can acheive at least 12-18% annualized return.
However, i still encourage people to aquire knowledge on money making investment either in stock or property. Money make money is always superior than work for money. Without financial and investment education, people understanding of investment is simply appalling
hng,
agree with you. I always encourage young people learn to invest by themselves, and just leave the PNB's opportunities to those who need this.
PNB's fixed-priced-funds really help some people, e.g. retiree. Through these funds, they get an opportunity to enjoy a higher return, comparable to equity funds (though not superior), while still have peace in mind that they don't have to worry about loosing their hard-earned money.
i believe is best compare PNB fund with others at the same starting point and similar size, only then we are able to tell which one perform better. Other than that it is just "assumption"
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