Although PRO TRADE SHARES provide mainly news on share trading in Bursa Malaysia, we also would like to update our readers on the latest investment opportunity.
Business Times Online today (15 July 2008) printed an article that should be of interest to Malaysian wanting to invest in foreign unit trust.
According to the report, the Securities Commission of Malaysia has given the go ahead to FUNDSUPERMART.com, the largest online unit trust distributor in Singapore, to offer its services to Malaysian.
I quote:
The website is expected to go live around September this year. At that time, retail investors can buy unit trusts from various fund houses at significantly lower prices, sources said.
“Close to 100 funds, invested in different asset classes and geographical areas, from several fund management companies are expected to be available when the website is launched,” a source said.
The portal is operated by iFAST Capital Sdn Bhd, a joint venture between OSK Investment Bank Bhd and Singapore’s iFAST Corp Pte Ltd.
It is talking to about 10 fund management companies here and has already signed on a few major players to distribute their products online, the source added.
The concept of online fund supermarkets is very popular in more advanced economies where retail investors are more sophisticated.
Investors can compare the charges and performance of various unit trusts from different providers, before picking the best deals that suit their requirements. Their investment decision is helped by the editorial and investment planning tools provided by the online operator.
However, this business model is fairly new to most Malaysians. Investors are likely to take years to warm up to this concept.
“It’s a learning curve. Even in Singapore, it took them a few years to break even and for the business to really take off,” a source said.
The arrival of fundsupermart.com will give Malaysian investors even more choices as another online financial products provider, Tune Money Sdn Bhd, may also sell unit trusts on its website soon.
In Singapore, fundsupermart.com started operations in 2000, and has grown to have S$1 billion (RM2.38 billion) worth of assets under administration as at May this year. The operation has since expanded to Hong Kong last July.
Although the upfront sales fee that will be charged to Malaysian investors have yet to be decided, it will be much lower than the usual charges for equity funds of between five per cent and six per cent. In Singapore, for example, fundsupermart.com has brought down sale charges to around two per cent, from three per cent that are generally charged by fund management companies.
Internet distributors can cut sale charges because this distribution model incurs lower operating expenses as it does not need to hire agents to promote products.
Although it is good news to investor, it is not so good news to Malaysian unit trust agent. Due to the ‘direct’ investment by investor without going through an agent, FUNDSUPERMART.com can afford to charge lower fees. Eventually, investors will opt for online investment rather than through an agent. Of course, we are talking about a few years down the road.
We foresee that very soon, in not distance future, a local version of online investment in unit trust will appear. Tune Money already is in the process of introducing a similar service. We also think that the smaller unit trust companies will also venture into the foray in order to reduce their cost / fees. With the reduction, more Malaysian will invest in their unit trust rather than those managed by larger unit trust companies.
The larger unit trust companies will probably approach this online sales method more cautiously in order not to upset their large number of agents. Large unit trust companies have relied on large agent base for their sales for a long time and they could not afford to upset their agents lest their agent quit on them.
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