1.1 What a Collective Investment Scheme Is and How Malaysian CIS Are Classified
Key Takeaways
A CIS lets investors with similar investment objectives pool their savings and entrust them to a professional fund manager who invests them for a shared return.
Malaysia's three unlisted fund types are UTS, PRS and wholesale funds, and their units are bought from and sold back to the Management Company at a price based on NAV.
A wholesale fund is a UTS whose units are offered exclusively to sophisticated investors: accredited investors, high-net-worth entities and high-net-worth individuals.
The three types of fund listed on Bursa Malaysia are closed-end funds, REITs and ETFs, and their market prices are set by supply and demand, so they can differ from NAV.
Malaysia's first ETF, the ABF Malaysia Bond Index Fund, was launched in July 2005.
The Basic Idea
FIMM's study guide describes a collective investment scheme (CIS) as a generic term for pooled investment vehicles. Investors with similar investment objectives pool their savings and entrust them to a professional fund manager, who invests the pool in a range of assets. The return is shared among those investors.
Three features matter for the exam:
- Manager discretion – as with a mutual fund overseas, the fund manager has complete discretion over investment decisions. Investors cannot direct day-to-day management.
- Regulated life cycle – the establishment, operation and even winding-down of a CIS are regulated, which protects investors.
- Trust structure – a CIS can be structured as a trust, with a Trustee holding the assets on behalf of investors. The fund's assets are segregated from the assets of both the fund manager and the trustee.
Which CIS Exist in Malaysia
| Under the Securities Commission Malaysia (SC) | Under other authorities |
|---|---|
| Unit Trust Schemes (UTS) | Pension and provident funds (for example EPF) |
| Private Retirement Schemes (PRS) | Investment-linked funds of life insurers (Bank Negara Malaysia) |
| Wholesale funds | Pilgrims' funds |
| Real Estate Investment Trusts (REITs) | |
| Exchange-Traded Funds (ETFs) |
The FCE focuses on UTS and PRS, but you must be able to place them in this wider landscape.
Unlisted Funds
UTS and PRS are unlisted: their units are not quoted or traded on a stock exchange. Key points:
- Pricing from NAV – the price is found by valuing the fund's investments to get the net asset value (NAV) and dividing by the number of units in circulation.
- Dealing with the Management Company – investors buy units from, and sell units back to, the Management Company, often through a Consultant, instead of through a stockbroker.
- Daily publication – Management Companies publish the NAV per unit daily on their websites, newspaper websites and/or FIMM's website. Under single pricing that NAV is both the selling price and the repurchase price.
- Usually open-ended – the size of the fund is not fixed and investors can buy and sell at any time. The study guide notes that some Management Companies cap the total units of a fund (the guide calls these "closed-end" funds); once those units are sold, new investors can only buy units that the Management Company has repurchased from other investors.
| Unlisted fund | Description |
|---|---|
| UTS | A trust arrangement managed by professional fund managers that lets investors with similar objectives pool money to share income or profits from securities, derivatives or other assets |
| PRS | A trust-based retirement scheme in which benefits depend solely on contributions plus declared income, gains and losses on them |
| Wholesale fund | A UTS offered exclusively to sophisticated investors: accredited investors, high-net-worth entities (HNWE) and high-net-worth individuals (HNWI), as defined in the SC's Guidelines on Categories of Sophisticated Investors |
Unlisted funds are also grouped by investment objective (income or capital growth) or asset class (equity, fixed income), with finer sub-groups such as small-capitalisation growth funds. These groupings matter because performance is compared within a category.
Listed Funds
Listed funds have units quoted and traded on a stock exchange:
- An investor buys or sells through a stockbroker, and the units come from another investor selling in the market.
- The market (buyers and sellers) sets the price, so it can differ from NAV.
- The Management Company's job is limited to managing the fund under the deed and prospectus.
- Listed funds such as closed-end funds and REITs can issue new units through a rights issue or private placement.
| Listed fund on Bursa Malaysia | What it is |
|---|---|
| Closed-end fund | A listed company that invests in shares of other companies; the number of units is fixed when it lists |
| REIT | A fund that owns and manages income-producing real estate (malls, hospitals, plantations, industrial property, hotels, offices); earnings come mainly from recurring rent |
| ETF | A listed fund that tracks an index, a commodity or a basket of assets; the first Malaysian ETF was the ABF Malaysia Bond Index Fund (July 2005) |
Unlisted vs Listed: The Comparison Examiners Like
| Feature | Unlisted (UTS, PRS, wholesale) | Listed (closed-end, REIT, ETF) |
|---|---|---|
| Where you deal | With the Management Company, often via a Consultant | On Bursa Malaysia through a stockbroker |
| Price basis | NAV per unit | Market price from supply and demand |
| Price vs NAV | Same as NAV under single pricing | Can trade above or below NAV |
| Fund size | Usually open-ended | Fixed units; grows through rights issues or placements |
Exam traps
- A REIT is a listed fund, not an unlisted fund (the first practice question in FIMM's Chapter 1 tests this).
- A wholesale fund is not for retail investors.
- "Open-ended" does not mean "listed". UTS and PRS are open-ended and unlisted.
Which of the following is an unlisted fund in Malaysia?
A real estate investment trust traded on Bursa Malaysia
An exchange-traded fund tracking a bond index
A wholesale fund offered only to sophisticated investors
A closed-end fund listed on Bursa Malaysia
Why can the market price of a listed fund differ from its net asset value?
Because the trustee revalues the fund only once a year
Because buyers and sellers in the market set the price through supply and demand
Because listed funds are not required to calculate their NAV
Because the Management Company adds its sales charge to the quoted price
Who may invest in a wholesale fund?
EPF members using the Members Investment Scheme
Sophisticated investors such as accredited investors and high-net-worth individuals or entities
Any Malaysian investor aged 18 or above
Only Unit Trust Management Companies investing their own capital
Sections you finish are checked off in the contents.