KUALA LUMPUR: i-VCAP Management Sdn Bhd is hopeful that local investors would eventually view financial instruments such as exchange traded funds (ETF) as a viable tool to gain sound exposure to the market.
An ETF is a type of financial instrument that is traded like a stock and its price usually tracks an underlying index or a basket of securities.
Its chief executive officer Mahdzir Othman said that the trend of investing in ETFs was quite “huge and popular” in other parts of the world and that the trend could catch up here eventually.
“Awareness can actually be increased with the rollout of more innovative and new types of ETFs here. I think this is an investor education matter as well. There needs to be full awareness and understanding of the product,” he said at a press conference after the launching of i-VCAP’s third ETF, the MyETF MSCI SEA ISLAMIC DIVIDEND (MyETF-MSEAD).
“There have been continuous investor education but the thing is to get investors to put their money into it and this has not been gaining enough traction yet. The ecosystem that surrounds the ETFs also needs to be addressed such as liquidity and to get more market makers to participate as well,” he added.
Mahdzir said that ETFs were proven and well accepted in developed financial markets and that the global ETF market was still growing and was now valued at more than US$2.9 trillion (RM10.54 trillion).
Malaysia currently has six ETFs listed on the Bursa Malaysia: ABF MALAYSIA BOND INDEX FUND, FTSE Bursa Malaysia KLCI, CIMB FTSE China 25, CIMB FTSE ASEAN 40 and i-VCAP’s MyETF-DJIM25 and MyETF-MMID.
i-VCAP said that the workings of an ETF were similar to a mutual fund except that it could be bought and sold like a share and traded in real time on an stock exchange.
On the Bursa, units are transacted via board lots of 100 units and can be backed by different asset classes, geographical and industry exposures including investment styles and or strategies.
“It provides exposure to a basket of securities but charges much lower fees as they are passively managed. In addition, investors will not incur any sales or exit charges when investing in ETFs except for the normal transaction charges when trading on the exchange,” it said.
The MyETF-MSEAD is an open-ended fund with an approved fund size of 500 million units. It closely tracks the performance of the MSCI SEA IMI Islamic High Dividend Yield 10/40 Index. MyETF-MSEAD will make its debut on May 7.
The forecasted net dividend yield of the MyETF-MSEAD was around 4% after accounting for management expenses, he said.
Other than normal brokerage charges for Bursa trading, annual fees which are chargeable for the fund include a management fee of 0.65%, a trustee fee of 0.045% and an index licence fee of 0.06%.
i-VCAP, which is a unit of ValueCAP Sdn Bhd, was established in 2002 and is jointly owned by Khazanah Nasional Bhd, Permodalan Nasional Bhd and the Retirement Fund Inc.