I'm back guys. Sorry for the long absence. I just went to China for holidays. Thank God I went to Guangzhou during CNY season. The traffic was good since many had gone away to their respective "kampungs" for CNY. If not, I'd probably spent most of my time on the roads.
Anyway, for those contemplating buying unit trusts, I did some simple research on some Malaysian unit trusts (Only selected few: Malaysia equities, Malaysia bonds and Malaysia Shariah equity) using prices ranging from 2004 to 2010 and some reward-risk measures such as Sharpe, M2, Treynor, Jensen's alpha coupled with performance consistency measures such as Spearman Rank. Probably there are a few research materials out there which offered contradicting conclusions. I'm thinking maybe I should just give a shot at this :p It's also a good warm-up for me after the long rest :)
A gist of the results as follow:
Looking at the tables above, generally unit trusts underperformed their benchmark indices (unfortunately). There seems to be no additional benefits of investing in unit trust funds as compared to individual stocks or bonds. However, it seems that equity funds were more resilient during market downturns. This could be due to greater diversification of the funds though this would need further analysis.
In addition, the Spearman rank measure seemed to show that there was little correlation between past and future performance implying that investors would not have the upper hand of picking past winning unit trusts.
Having said that, there were a few funds which consistently appeared in the higher rankings and outperformed their peers and benchmark indices. The funds were Kenanga Growth, Kenanga Syariah Growth and AmDynamic Bond which were also winners of The Edge-Lipper Fund Awards for multiple years. In this case, investors would need to go the extra mile to identify consistent winners like the ones mentioned above rather than just buying any unit trusts recommended by your unit trust agents.
PS: Sorry about the small tables. You might need a magnifying glass to read them or zoom in the page :p