All You Need to Know About Unit Trusts: A Comprehensive Guide For Beginners

All You Need to Know About Unit Trusts: A Comprehensive Guide For Beginners

Level 2 - Asset Classes - Managed Funds

10 min read  ·  3526 views

Looi Shin Nye, Research Analyst Intern

Reviewed By Charlie Yuan Ting Jing, CFA, CQF

Introduction to Unit Trust in Malaysia

Illustrative of  Parties Involved in a Unit Trust Scheme
Illustrative of Parties Involved in a Unit Trust Scheme

Source:PJJ Financial Discussion

Unit Trust, also referred to as mutual funds, allows investors with shared goals to pool their money together and invest in a portfolio composed of various asset classes like cash, derivatives, shares and large commercial properties, corporate bonds that are not normally available through other forms of direct investment.

Investors in a unit trust own units, which are a portion of the fund. The value of each unit is based on the total value of all the fund's investments and how many units are in the fund. So, when the value of the fund changes, so does the value of your units. Therefore, it is best to think about investing in Unit Trust for a longer timeline. Over time, this form of investment will be more profitable than cash savings and fixed deposit investments. (FiMM)

Key takeaways

  • More than 700 Unit Trust Funds are available locally in Malaysia in 2022.
  • Unit trusts offer a range of professionally managed funds with built-in diversification and a variety of choices
  • Risks of over-diversification, expensive costs, and the restriction posed by prospectus might negatively impact investment return.
  • Malaysian investors can start unit trust investments via Unit Trust Consultant, Banks, Online unit trust marketplaces, PRS and EPF’s Member Investment Scheme.
  • Unit trusts are safe as it is well regulated; however, investors must be aware of the underlying risk that might potentially harm the return.

Unit Trust in Malaysia

In Malaysia, the first unit trust was introduced in 1959. As of 30 September 2022, there were a total of 750 unit trust funds available in the Malaysian market offered by 41 locally-incorporated unit trust management companies (Securities Commission)). While in 2021, the unit trust funds industry experienced significant growth, with gross sales of RM404.52 billion (2020: RM353.36 billion). The total net asset value (NAV) also increased by 1.42% to RM526.89 billion (2020: RM519.53 billion) (Tan Siew Mung)

According to the Securities Commission Malaysia’s (SC) Youth Capital Market Survey: A Malaysian Perspective, 86% of youth prefer to invest in unit trust funds when it comes to capital market products, the highest among all other investment products, including stocks as shown in the image below.

Youth awareness on capital market product
Youth awareness on capital market product

Source: Securities Commission Malaysia’s (SC)

Pros and Cons of Investing in a Unit Trust


1. Peace of mind

Investors who lack the time or skill set to do the necessary research and manage their own portfolios can rest easy with Unit Trust investments. Professional fund managers are in charge of managing these funds, giving investors peace of mind that their money is in good hands. Additionally, unit trusts do not require investors to constantly buy and sell securities—the fund manager handles that for them, making it a helpful asset.

2. Built-in Diversification

Unit Trusts provide investors with the opportunity to access a variety of asset classes with a minimal capital requirement, fundamentally reducing portfolio volatility while generating good returns without taking on excessive risk. (Bob Haegele)

As an example, "United Bond & Equity Strategic Trust" provides exposure to equities (53.16%), bonds (34.96%) and cash (11.88%) -- all for one price. With Unit Trusts, investors can acquire diversified portfolios conveniently and cost-effectively.

3. Vast of choice that suits different investors

Investors of all types can find an ideal fund that fits in with their personal goals, investment horizon, and risk tolerance level. For instance, those desiring more conservative investments can select fixed-income or money market funds; however, those willing to take higher risks in pursuit of greater returns may choose equity funds. (RankMF) With these diverse investment choices, investors can find a match that suits their needs.


1. Over-diversification

Diversification in Unit trusts offers multiple advantages, but they also have downsides. If investors spread their investments too thin, may lead to over-diversification and profits could be diminished due to over-diversification. Therefore, it is important to establish a clear investment objective before making any Unit trust investments. (RankMF)

2. Cost

It's important to know the associated fees and charges that come with any Unit Trust investors may be considering investing in. Expense ratios usually include management fees, trustee charges, redemption fees and switching fees - all of which can significantly reduce your return rate. For information on current and past expense ratios, investors can consult sources such as FSMOne, Fund's annual reports, websites and more.

Sales ChargeFees that pay when purchasing a fund
Switching FeeIncurred when switching one fund to another to discourage investors from switching funds frequently.
Redemption FeeCharged when investors redeem the investment. This fee is to encourage investors to invest for a longer term as it decreases year by year.
Annual management feesFees paid to fund managers to manage their money.
Trustee feesPaid to the trustee that safeguards the trust’s assets and ensure the fund is run according to the prospectus.

Source: FSMOne, iMoney

Note: As evidenced by the findings from FiMM's survey, 36% of investors indicated that high fees and sales charges prevent them from investing in unit trust funds and PRS.

3. Restriction on Prospectus and lacked control

When investing, fund managers follow the investment parameters set out in a prospectus. This can limit their ability to capitalize on market opportunities due to constraints outlined in the prospectus. Resulting in lower returns than the rest of the market. (muzi13)

Additionally, investors have no control or influence over the decisions that fund managers make; and may therefore incur losses due to poor management by the managers.

Where to buy Unit Trust in Malaysia

A. Unit trust scheme consultant

Both Unit Trust Management Companies (UTMCs) and institutional unit trust agents (IUTAs) will use employees or agents called unit trust consultants (UTCs) who are registered with the Federation of Investment Managers Malaysia (FIMM) to market, promote and distribute Unit Trust Schemes.

Note: There were over 64,000 authorized unit trust scheme consultants. Investors can verify whether a consultant is authorised through FIMM's website – www.fimm.com.my/search/

Unit trust scheme consultants are invaluable and will add confidence for investors that looking to invest in funds. They explain the features and characteristics of each fund and suggest funds which reflect the investor's needs, risk tolerances, and financial situation. (Bank Islam)

However, it is important that investors do their own research as well. Agents often only recommend the funds available in their own Unit Trust Management Company, so researching further gives more assurance that the right decision is made.

B. Banks offering unit trust

Investing in Unit Trusts through banks that investors are familiar with and confident with can be a convenient option, as investors can make use of existing accounts to invest in unit trusts.

For example, existing CIMB users can start their Unit Trust investment with CIMB Clicks with just simple steps. Nevertheless, Maybank does launch Maybank Flexible Retirement Solution which offers target returns of up to 6%-8% p.a. with unit trust funds for their retirement saving. Public Bank’s wholly-owned subsidiary - Public Mutual, is a top private unit trust management company offering more than 160 unit trust funds within its platform.

However, one potential drawback of this approach is that funds choices are somewhat limited. (Alex Cheong Pui Yin) This may impact the investment returns as there might be far better Unit Trust Funds available in the market that makes investors lose the investment opportunities.

C. Online unit trust marketplaces

Online platform where investors can conveniently get to choose and compare hundreds of available funds from different fund managers or categories conveniently in a single platform. All the relevant information such as past performance, prospectus, and annual reports are available on the platform. Investing has never been easier!

Example of unit trust one-stop online trading platform: FSMOne, eUnittrust

• FSMOne

FSMOne (formerly known as Fundsupermart.com) is an IUTA, PRA & Financial Adviser that is licensed under the SC which provides investors with access to a one-stop online trading platform. This platform allows users to purchase unit trusts from 700+ funds from 30 fund house sources: locally, internationally and a blend of both.

With the "Find My Fund" feature, investors can receive tailored fund recommendations based on investment amount, accumulation period and risk level. In addition, other features such as research articles, data analysis tools and rewards are available to add more value to the investing journey.

• eUnittrust

eUnittrust.com.my Comparison To Other Unit Trust Fund Distributors.
eUnittrust.com.my Comparison To Other Unit Trust Fund Distributors.

Source: eUnittrust

eUnittrust is a one-stop online platform that provides resources to help investors make well-informed decisions. It allows users to purchase over 400 Malaysia and global unit trust funds online and provides them with insights through independent research reports and charts. In this way, eUnittrust simplifies the investment process for everyone.

D. EPF- Members Investment Scheme (MIS)

Members of Malaysian Employees Provident Fund (EPF) are eligible to participate in the Members Investment Scheme (MIS) providing them with an opportunity to diversify their retirement portfolio by investing part of their retirement savings in approved unit trust funds.

To be eligible, members must be under 55 years of age and have sufficient savings in EPF Account 1 that meet their age band requirements. The maximum amount that can be invested is 30% of the amount in excess of the base savings of Account 1. For example

Scenario of members' Eligibility and its amount
Scenario of members' Eligibility and its amount

Source: EPF

Platform to invest in MIS - KWSP Counter, i-Akaun (Member) under EPF i-invest, and 21 Fund Management Institutions (FMI) under KWSP Website

E. Private Retirement Schemes (PRS)

PRS, regulated by the Securities Commission, is a voluntary long-term savings and investment scheme that gives individuals the opportunity to save up for retirement. Members are eligible to take out their full savings when they reach the age of 55. (PPA)

Additionally, investors can benefit from tax relief (up to MYR 3,000 per taxpayer per year of assessment from 2021 to 2025), low sales charges and budget-friendly initial investments with PRS.

Platforms to invest in PRS: PRS Online, Public Mutual, CIMB and many more PRS Providers.

FAQs about the Unit Trusts in MALAYSIA

1. Are Unit Trusts safe?

The Malaysian unit trust industry is regulated by the Securities Commission (SC) and the Capital Markets and Services Act 2007 (CMSA). To set up a unit trust fund, authorisation must be provided by the Securities Commission, including approval of the fund's management company and its trustee. All these are to protect investors and ensure their interests are upheld.

2. Will unit trust lose money?

Yes, investing in a Unit Trust carries no guarantee of return and investors can potentially lose money. Risk is inherent, as returns depend on the activity and performance of the trust's underlying assets such as stocks, bonds or other investments. When these assets decline in price, it reflects in the overall value of the trust; hence leading to potential losses for investors. (Bob Haegele)

Note: Fees can also reduce the returns as Fees are payable regardless of how well or poorly the fund performs.

3. How Unit Trust gives a return?

  • Income Distribution - When a fund earns dividends from stock or interest from bonds, it will distribute to the unit holder. (Charles Schwab) Normally on a regular schedule (e.g., once or twice per year for Fixed income fund)
  • Capital appreciation - NAV of the units fluctuate depending on the fund’s performance. Capital appreciation happens when the NAV of units increase beyond what investors have paid, they may choose to redeem them at a higher value and reap profits. (CIMB)

4. Why does the unit price falls after income distribution?

Income earned by the respective unit trust fund is accrued in its unit’s price until the end of the distribution period. When dividends are declared and paid out, the Net Asset Value (NAV) per unit will tend to fall by approximately the same amount as the income distribution. (KAF)

5. What is Shariah-compliant unit trust?

A Shariah-compliant unit trust fund is a type of investment that is tailored to meet the needs of those looking to adhere to Islamic principles while still participating in the financial markets. This fund invests in a diversified portfolio of securities that comply with Shariah requirements. To ensure full compliance, all daily operations must comply with these requirements as well; meaning any loan stocks, non-Shariah compliant securities, conventional interest-paying bonds or derivatives are strictly prohibited investments for this type of fund. (Bos Wealth Management)

Note: Both Muslims and Non-Muslim investors are welcome to invest in Shariah-compliant unit trusts.

The Bottom Line

Unit Trusts are increasingly becoming a popular choice for investing in Malaysia. As unit trusts are well regulated, and offer numerous benefits and hundreds of funds available locally through numerous platforms, giving investors a variety of options to find the perfect fit for their individual needs and goals.

However, there is still an element of risk associated with unit trusts due to market fluctuations and fund managers may make mistakes. Therefore, it is a keynote for investors to keep in mind that there's no guaranteed return in unit trust and make sure that they understand their investment preferences and needs before investing. Investors are advised to put in some time to conduct comprehensive research and utilize the information provided by unit trust platforms, reports and at least look at the fund factsheet in order to make informed decisions prior to any investment transactions.

Read also: Investing in Unit Trusts in Malaysia: A Step-by-Step Guide



speaker profile

This article is written by Looi Shin Nye, Research Analyst Intern

Looi Shin Nye is currently majoring in Finance and Investment at Tunku Abdul Rahman University of Management and Technology (TAR UMT). Shin Nye joined TED Optimus Sdn Bhd for 3 months as an intern, responsible for research work and article writing. She participates in Bursa Malaysia Derivatives Virtual Trading Challenge 2021. She is an in-house author from TED Optimus.


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Table of Contents

  1. Introduction to Unit Trust in Malaysia
  2. Key takeaways
  3. Unit Trust in Malaysia
  4. Pros and Cons of Investing in a Unit Trust
  5. Where to buy Unit Trust in Malaysia
  6. FAQs about the Unit Trusts in MALAYSIA
  7. The Bottom Line
  8. References