Properties & Commodities Funds
In Malaysia
An Overview
1
OVERVIEW OF PROPERTY FUNDS
3 GEOGRAPHICAL LOCATIONS
1. ASIA / ASIA-PACIFIC ( 4 )
2. EUROPE ( 1 )
3. GLOBAL ( 4 )
CATEGORY OF FUNDS
1. FEEDER FUNDS
2. DIRECT
2
WHAT INSTRUMENT DO THEY INVEST IN
1. PROPERTY SHARES
2. INFRASTRUCTURE FUNDS / TRUSTS
3. REITS
3
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
4
STI vs Non- landed Residential Price Index
5
REAL ESTATE INVESTMENT TRUST
1. 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 incomegenerating commercial real estate, which has the potential of a capital
upside over the long run."
6
REITS – PROPERTY PORTFOLIO
1. COMMERCIAL
2. OFFICE / INDUSTRIAL
3. WAREHOUSING / LOGISTICS
4. WAREHOUSE RETAIL FACILITIES
5. LIGHT INDUSTRIAL
7
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.
Crystal Plaza
ADDRESS
No.4 Jalan 51A/223
46100 Petaling Jaya
Selangor
CATEGORY
Office
ACQUISITION
DATE
3 August 2005
TITLE
Commercial Leasehold
Expiring 9 June 2059
PURCHASE PRICE
RM56,400,000
AGE OF BUILDING
About
15
years
APPRAISED VALUE
RM89,800,000
NET LETTABLE AREA
200,970 sq ft [18,671 sq
m]
GROSS REVENUE*
RM9,375,212
LAND
AREA
77,464 sq ft [7,196 sq
m]
AVERAGE
OCCUPANCY**
100%
NUMBER OF
TENANTS**
10
MAJOR TENANTS
Tenaga Nasional Bhd
[the national power
company],
Scope International (M)
Sdn Bhd [Standard
Chartered Bank shared
services],
DHL Asia Pacific Shared
Services Sdn Bhd,
Asiaworks Training Sdn
Bhd
8
REITS – SALIENT POINTS
1. Income Distribution – Quarterly, Semi-Annually
2. Fund Manager , Property Manager, Compliance Manager, Trustee,
Investment Committee, Shariah Advisor
3. 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
4. Listed Funds - the price of the unit should be the price quoted on the
exchange.
5. Unlisted Funds - After the initial offer period, the price of a unit should be
the NAV per unit of the fund.
6. Website of Axis-Reit www.axis-reit.com.my
7. Presentation Slides – axis reit
9
AN OVERVIEW OF THE NATURAL RESOURCES FUNDS IN MALAYSIA
1. UNIT TRUST SCHEMES
2. SHARED FARMING INTEREST SCHEMES
UNIT TRUST SCHEMES
1. GOLD & PRECIOUS METALS
2. NATURAL RESOURCES
3. COMMODITIES ( LIPPER CLASSIFICATION )
10
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.
11
TERMS USED
1. PRECIOUS METALS
Platinum, palladium, rhodium, gold, silver etc
2. BULK COMMODITIES
Coal, Iron Ore, steel etc
3. BASE METALS
Copper, Aluminium, Nickel, Zinc, Lead etc
4. AGRICULTURAL PRODUCTS
Soya bean, Wheat, Corn, Coffee, Sugar, Livestock etc
5. ENERGY
Crude oil, Gasoline, Natural Gas etc
12
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
13
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
14
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
15
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
2. Category
-
3. Diversification 4. Risk Profile 5. Investor Profile
6. Launch Date 7. Plots issued -
Golden Palm Growers Scheme
Shared Farming Interest Scheme
( Plantation REITs )
like a guaranteed fund with guaranteed
/ steady returns
Low / Minimal
Risk Averse Investor – those seeking
guaranteed / steady returns over the
medium to long term.
20th August 2010
19,600 plots ( 70% )
16
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 )
17
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 )
18
THE END
19
20
MONEY MARKET FUND STATISTICS @ 1st APRIL 2011
Description
Islamic
Conventional
Total
2008
2011
2008
2011
2008
2011
No. of Funds
15
26
26
46
41
72
No. of Funds > 5 yrs
1
4
3
16
4
20
750m
4,319m
11,803m
19,245m
12,553m
23,564m
Fund Size
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%
21
ADVANTAGES OF MONEY MARKET FUNDS
1. 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%
22
HOW IT BENEFITS YOU
1. 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
23
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.
24
MMF – INVESTMENT OBJECTIVE
1. To provide investors with a regular income stream
2. And high level of liquidity
3. While maintaining capital preservation ( Low risk )
25
MMF – ASSET ALLOCATION & DEFINITIONS
1. 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
26
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.
27
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
28
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
29
MONEY MARKET
 In finance, the money market is the global financial market for shortterm 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.
30
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.
31
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.
32
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
YTL P (P1) 2011/0.00
NV
25m
MP
98.92
Cost
24.6m
FV
24.7m
%ofNAV
6.06
33
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
34
HOW DOES MMF GIVE BETTER RETURNS
1. ECONOMIES OF SCALE
2. SELECTION OF PAPERS
35
MONEY MARKET FUNDS - CLASSIFICATION
 CASH FUNDS
 FUNDS BACKED BY GUARANTEED INSTRUMENTS
 FUNDS BACKED BY NON-GUARANTEED INSTRUMENTS
 FUNDS BACKED BY BOTH LOCAL & FOREIGN PAPERS
36
HOW DO YOU APPROACH MARKETING MMFs
1. RETURNS
2. SAFETY
3. LIQUIDITY
4. FEES
5. LIPPER?
6. RATIOS?
37
THE END
38