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Properties & Commodities Funds In Malaysia An Overview

Properties & Commodities Funds In Malaysia An Overview. Presented by Mr. Kumaravelloo Pillai. OVERVIEW OF PROPERTY FUNDS. 3 GEOGRAPHICAL LOCATIONS ASIA / ASIA-PACIFIC ( 4 ) EUROPE ( 1 ) GLOBAL ( 4 ) CATEGORY OF FUNDS FEEDER FUNDS DIRECT. WHAT INSTRUMENT DO THEY INVEST IN.

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Properties & Commodities Funds In Malaysia An Overview

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  1. Properties & Commodities Funds In Malaysia An Overview Presented by Mr. KumaravellooPillai

  2. OVERVIEW OF PROPERTY FUNDS • 3 GEOGRAPHICAL LOCATIONS • ASIA / ASIA-PACIFIC ( 4 ) • EUROPE ( 1 ) • GLOBAL ( 4 ) • CATEGORY OF FUNDS • FEEDER FUNDS • DIRECT

  3. WHAT INSTRUMENT DO THEY INVEST IN • PROPERTY SHARES • INFRASTRUCTURE FUNDS / TRUSTS • REITS

  4. INFRASTRUCTURE FUNDS / TRUSTS Infrastructure funds generally focus on utilities, transportation / logistics and communication, among others. Utilities – facilities for the recycling ,treatment, distribution and supply of water. Facilities for the generation, transmission, distribution and supply of electricity and gas T / Logistics – shall include toll roads, railways, storage terminals, airport, seaports Communications – comprise broadcast transmission infrastructures, satellite systems and wireless network infrastructures

  5. STI vs Non- landed Residential Price Index

  6. REAL ESTATE INVESTMENT TRUST • WHAT IS A REIT?"A REIT is a collective investment scheme where funds from investors are pooled and invested towards a specified goal as set out in the investment objective of the fund.  In addition, a REIT is a fund that invests (via funds raised from investors) in a portfolio of real estate assets or real estate-related assets.  Income from the real estate portfolio comprising primarily of rents collected from tenants, less expenses, is then distributed to investors at regular intervals.  REITs therefore provide investors with an alternative transparent, liquid vehicle to invest in a diverse portfolio of professionally managed income-generating commercial real estate, which has the potential of a capital upside over the long run."

  7. REITS – PROPERTY PORTFOLIO • COMMERCIAL • OFFICE / INDUSTRIAL • WAREHOUSING / LOGISTICS • WAREHOUSE RETAIL FACILITIES • LIGHT INDUSTRIAL

  8. REITS - COMMERCIAL Crystal Plaza - Located next door to Menara Axis the building enjoys the same access to public transport and a presence on the Federal Highway. In addition the building features very large floor plates and a high tension electrical supply system thus making it well suited for data centres, shared service centres and IT users.

  9. REITS – SALIENT POINTS • Income Distribution – Quarterly, Semi-Annually • Fund Manager , Property Manager, Compliance Manager, Trustee, Investment Committee, Shariah Advisor • Transaction – (a ) the acquisition price is not more than 110% of the value assessed in the valuation report; • (b) the disposal price is not less than 90% of the value assessed in • the valuation report; and • Listed Funds - the price of the unit should be the price quoted on the exchange. • Unlisted Funds - After the initial offer period, the price of a unit should be the NAV per unit of the fund. • Website of Axis-Reit • Presentation Slides – axis reit www.axis-reit.com.my

  10. AN OVERVIEW OF THE NATURAL RESOURCES FUNDS IN MALAYSIA • UNIT TRUST SCHEMES • SHARED FARMING INTEREST SCHEMES • UNIT TRUST SCHEMES • GOLD & PRECIOUS METALS • NATURAL RESOURCES • COMMODITIES ( LIPPER CLASSIFICATION )

  11. PORTFOLIO DESCRIPTION & OBJECTIVE 1.The Global Resources Portfolio invests primarily in equity securities of issuers involved in the extraction, processing, transportation and distribution of natural resources of any kind. It is a globally diversified portfolio that includes exposure to oil and natural gas, base metals, minerals, chemicals, precious metals, paper and forestry, and agricultural goods. 2.The Global Resources Portfolio seeks long term growth of capital and protection against inflation and monetary instability by investing in high quality natural resource companies worldwide.

  12. TERMS USED • PRECIOUS METALS • Platinum, palladium, rhodium, gold, silver etc • BULK COMMODITIES • Coal, Iron Ore, steel etc • BASE METALS • Copper, Aluminium, Nickel, Zinc, Lead etc • AGRICULTURAL PRODUCTS • Soya bean, Wheat, Corn, Coffee, Sugar, Livestock etc • ENERGY • Crude oil, Gasoline, Natural Gas etc

  13. WHAT DRIVES THE PRICES • 1.SUPPLY – Geopolitical events, Weather patterns, Available capacity, Production efficiency, Limited resources, Int’l cartel regulations, • Time lag for new supply • 2.DEMAND - Strong global growth, Growing populations, Emerging markets, Increased wealth, Hedge funds / speculators, Investors like, Pension funds, Insurance companies

  14. MARKET OPPORTUNITY 1.Resurgence of growth in emerging markets BEYOND China • 2.India looking to spend $1 trillion over the next 5 years on infrastructure • 3.Brazil building out for World Cup and Olympics • 4.Recent events • − flooding in Australia, earthquake in Japan and political unrest in North Africa & Middle East − demonstrate the fragility of global supply chains for vital natural resources 5.Loose monetary policies in developed market economies put upward pressure on commodities 6.The US dollar appears on a long term decline, especially against emerging market currencies Source: Newgate Capital

  15. Global Resources Are a Natural Hedge 1.Rising Inflation: Natural resources are one of the few asset classes that benefit from inflation. Commodity prices tend to rise when inflation is accelerating. 2.Energy Supply Shocks: Commodities can benefit from a volatile oil market. Given the tight supply outlook, the current risk of disruption remains high. 3.Weaker US Dollar: Continued pressure on the US dollar could shift investors into hard currencies, such as gold or silver. 4.Event Risk: Natural resources can act as a hedge against unforeseen developments such as war, terrorism, weather or geopolitical events. 5.Market Outlook ? Source: Newgate Capital

  16. SHARED FARMING INTEREST SCHEMES 1.COUNTRY HEIGHTS GROWERS SCHEME - 2007 2.GOLDEN PALM GROWERS SCHEME – 2010 3. www.goldenpalm.com.my GOLDEN PALM GROWERS SCHEME: 1. Name - Golden Palm Growers Scheme 2. Category - Shared Farming Interest Scheme ( Plantation REITs ) 3. Diversification - like a guaranteed fund with guaranteed / steady returns 4. Risk Profile - Low / Minimal 5. Investor Profile - Risk Averse Investor – those seeking guaranteed / steady returns over the medium to long term. 6. Launch Date - 20th August 2010 7. Plots issued - 19,600 plots ( 70% )

  17. SHARED FARMING INTEREST SCHEME 8. Phase 1 - 6,000 Plots Sold Out at RM 7,000 9. Phase 2 - 2,500 Plots being sold at RM 8,000 10. Dividend Date (FYE) - 20th August 11. Dividend Payment - Within 60days from FYE 12. Fees – Service Charge - Nil Fees - Management - RM 20 / plot ( 0.25% ) Fees - Transfer - RM 50 / plot 13. Prospectus - Renewed every 6 months 14. Safety - Companies Commission Malaysia - Zul Rafique & Partners ( Legal Adviser ) - Ernst & Young ( Accounts Auditors ) - Am Trustee ( Trustee ) - Agriculturist Development Sdn Bhd ( Operations Auditors )

  18. SHARED FARMING INTEREST SCHEME 15. Returns Phase 1, Year 1 to Year 6 – 6% guaranteed returns pa plus Discretionary bonus ( Tax to be paid by Grower / Investor ) Phase 2, Year 7 to Year 23 - profit sharing or according to CPO price, whichever higher 16. Redemption Year 1 - Cannot Redeem or Transfer Year 2 to 6 – Sell in secondary market set up by Management Year 7 onwards – Management guarantee buy back at same price, limited to 10% grower plots pa ( 1,960 plots )

  19. THE END

  20. MONEY MARKET Presented by Mr. Kumaravelloo

  21. MONEY MARKET FUND STATISTICS @ 1st APRIL 2011 Largest Fund 5,755m Best Performance( 1 yr ) 3.90% Worst Performance ( 1 yr ) -0.68% FD rate ( 1 yr ) 2.85% Benchmark – MBB 1mth FD rate 2.75% Benchmark - Repo 2.65%

  22. ADVANTAGES OF MONEY MARKET FUNDS • Tax Free 2. Higher Returns 3. Liquid – Easy redemption, T, T+! etc 4. Safe – Minimal risk 5. Flexible – No limit of tenure 6. No Service Charge, No Exit Fee and Management Fee from 0.50% to 0.75%

  23. HOW IT BENEFITS YOU • Passive income – 0.05% to 0.20% 2. Easy to manage customer expectation 3. Different Target Market 4. Leverage - Different Products - Additional Customers • IF YOU AGREE TO SLIDES 2 & 3, THE CHANCES OF YOU MARKETING MONEY MARKET FUNDS ARE GREATER

  24. MONEY MARKET FUND • Money market fund is an open-ended unit trust fund investing primarily in very short term, highly liquid, near cash, money market instruments and partially in fixed income securities. • The fund expects to maintain a weighted average portfolio maturity appropriate to its stated investment objective. • Under normal circumstances, the weighted average term to maturity of the investments is expected to be approximately 1 to 24 months.

  25. MMF – INVESTMENT OBJECTIVE • To provide investors with a regular income stream 2. And high level of liquidity 3. While maintaining capital preservation ( Low risk )

  26. MMF – ASSET ALLOCATION & DEFINITIONS • The fund will invest a minimum of 70% of its NAV in cash, deposits and other liquid assets. Up to 30% of its NAV will be invested in money market instruments, fixed deposits, bonds and commercial paper with a minimum credit rating of P2 /A3 or equivalent rating 2. Other liquid assets include, but are not limited to, securities issued by the government or quasi government bodies, including but not limited to Khazanah, Cagamas, Danaharta, Danamodal and BNM, securities guaranteed by the government and private debt securities which have accorded a rating of P1 or its equivalent 3. In the late 1980s, Bank Negara Malaysia was the Government agency responsible for the regulation of corporate bond issuance. In March 1993, the Securities Commission (SC) was established to act as the single regulatory body to promote the development of the capital market, in particular to rationalise securities market regulations. RAM & MARC

  27. GOVERNMENT DEBT SECURITIES Definition of Government Securities Malaysian Government securities are marketable debt instruments issued by the Government of Malaysia to raise funds from the domestic capital market to finance the Government's development expenditure and working capital. The central bank, Bank Negara Malaysia in its role as banker and adviser to the Government, advises on the details of Government securities issuance and facilitates such issuance through various market infrastructures that it owns and operates.

  28. GOVERNMENT DEBT SECURITIES Currently, the various forms of Government securities in Malaysia are:- • Malaysian Government Securities (MGS) - interest bearing long-term bonds issued by the Government of Malaysia to raise funds from the domestic capital market for development expenditure. • Malaysian Treasury Bills (MTB) - short-term securities issued by the Government of Malaysia for working capital. • Government Investment Issues (GII) and Malaysian Islamic Treasury Bills (MITB) - long-term and short-term non-interest bearing Government securities, respectively, issued based on Islamic principles by the Government of Malaysia. • Source: BNM

  29. GOVERNMENT DEBT SECURITIES - HISTORY • MGS were initially issued to meet the investment needs of the Employees Provident Fund (EPF), local banks and insurance companies. In the late 1970s and early 1980s, MGS were issued to finance the public sector's development expenditure. In contrast, by the 1990s, the purpose of MGS issuance was extended to funding part of the Government's budget deficit and prepayment of some of the Government's external loans. The Government continued to issue MGS during the fiscal surplus of 1993-1997 to meet the market demand for MGS. • GII and MITB, on the other hand, were issued to allow Islamic banks to hold liquid papers that meet their statutory liquidity requirements. The issuance of these papers also enabled them to invest their liquid funds in instruments that are issued based on Shariah principles as they are unable to purchase or trade in Malaysian Government Securities (MGS), Malaysian Treasury Bill (MTB) or other interest-bearing instruments. • Source: BNM

  30. MONEY MARKET • In finance, the money market is the global financial market for short-term borrowing and lending. It provides short-term liquid funding for the global financial system. The money market is where short-term obligations such as Treasury bills, commercial paper and bankers' acceptances are bought and sold. • The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend. Participants borrow and lend for short periods of time, typically up to twelve months. Money market trades in short term financial instruments commonly called "paper". This contrasts with the capital market for longer-term funding which is supplied by bonds and equity.

  31. WHAT IS MONEY MARKET? • The money market is a subsection of the fixed income market. We generally think of the term fixed income as being synonymous to bonds. In reality, a bond is just one type of fixed income security. The difference between the money market and the bond market is that the money market specializes in very short-term debt securities (debt that matures in less than one year). Money market investments are also called cash investments because of their short maturities. • Money market securities are essentially IOUs issued by governments, financial institutions and large corporations. These instruments are very liquid and considered extraordinarily safe. Because they are extremely conservative, money market securities offer significantly lower returns than most other securities.

  32. COMMON MONEY MARKET INSTRUMENTS • Bankers' acceptance - A draft issued by a bank that will be accepted for payment, effectively the same as a cashier's check. • Certificate of deposit - A time deposit at a bank with a specific maturity date; large-denomination certificates of deposits can be sold before maturity. • Repurchase agreements – In a Repo or Repurchase Agreement, the bank sells its money market instruments approved by Bank Negara Malaysia to an investor, with an understanding to buy back the said instruments at an agreed price (interest rate) on a specific future date. • A Repo offers flexibility because the tenor ranges from 1 day to 1 year and investors can retire the transaction earlier (Reverse Repo), subject to rate adjustment, should they need the funds prior to maturity.

  33. COMMON MONEY MARKET INSTRUMENTS • Negotiable Instrument Of Deposit - A Negotiable Instrument of Deposit (NID) is a financial instrument issued by banks for the deposit of a specific sum of money for a fixed period of time at a prefixed interest rate. An NID can be bought or sold before the date of maturity. • Commercial Paper - An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. Maturities on commercial paper rarely range any longer than 1 year. The debt is usually issued at a discount, reflecting prevailing market interest rates. Commercial paper is not usually backed by any form of collateral, so only firms with high-quality debt ratings will easily find buyers without having to offer a substantial discount (higher cost) for the debt issue. Eg Commercial Paper N V MP Cost FV %ofNAV YTL P (P1) 2011/0.00 25m 98.92 24.6m 24.7m 6.06

  34. RISK & RISK MANAGEMENT 1. MARKET RISK - PORTFOLIO DIVERSIFICATION / ASSET ALLOCATION 2. INTEREST RATE - MATURITIES 3. CREDIT RISK - CREDIT ANALYSIS /PORTFOLIO DIVERSIFICATION Eg. AAA - 2.27% B - 0.70% AA2 - 3.20% P1 - 77.95% AA3 - 14.98% A1 - 0.90% 4. LIQUIDITY RISK – LARGE MARKET CAP / LIQUID ASETS

  35. HOW DOES MMF GIVE BETTER RETURNS 1. ECONOMIES OF SCALE 2. SELECTION OF PAPERS

  36. MONEY MARKET FUNDS - CLASSIFICATION • CASH FUNDS • FUNDS BACKED BY GUARANTEED INSTRUMENTS • FUNDS BACKED BY NON-GUARANTEED INSTRUMENTS • FUNDS BACKED BY BOTH LOCAL & FOREIGN PAPERS

  37. HOW DO YOU APPROACH MARKETING MMFs • RETURNS 2. SAFETY 3. LIQUIDITY 4. FEES 5. LIPPER? 6. RATIOS?

  38. THE END

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