Allowing Joint-Venture Foreign Fund Management companies to manage local Unit Trusts

Kuala Lumpur, 16 December 1996

When the Guidelines for the Establishment of Foreign Fund Management Companies (FFMCs) were first released in August 1995, the Government made it a policy to allow FFMCs with at least 30 per cent local equity to manage local institutional funds but not local unit trust funds.

This was a policy that was consciously taken by the Government after consideration of all relevant circumstances at that time. Foremost amongst these was the Government’s sensitivity of the need to balance the liberalisation of the fund management industry with the obligation to ensure that the pace of liberalisation be properly managed so as not to adversely affect the development of the nascent local fund management industry.

The role of the fund management industry in general, and the unit trust industry in particular, has been recognised as central to the overall development of the Malaysian capital market. The growing acceptance by retail investors of unit trusts as an efficient savings instrument is reflected in its growth over the years. The number of approved funds has increased from 39 in 1992 to 74 by 30 September 1996, with total net asset value of the funds growing from RM15.7 billion to RM56.1 billion during that period.

It is and has always been the policy of the Securities Commission (SC) as the authority that regulates and facilitates the development of the unit trust industry, to encourage unit trust management companies to develop, as far as possible, in-house capabilities for the management of unit trust funds. It is for this reason that any unit trust management company wishing to have its funds managed by external funds managers is required to obtain specific approval of the SC. However, in circumstances where in-house fund management capabilities cannot be properly developed, the SC is of the view that in the interest of the unitholders, it is incumbent that the unit trust management companies are allowed to have their funds managed by the most capable external fund managers available in Malaysia. To date, of the thirty (30) unit trust management companies, ten (10) have appointed external investment managers to manage some of their funds.

In this regard the SC is pleased to announce that the Government has agreed to allow the first ten (10) joint-venture FFMCs (with at least 30 per cent local equity) that satisfy all the requirements of the FFMC Guidelines including in particular, the requirement with regard to managing at least USD100 million in funds sourced from outside Malaysia, to manage domestic unit trust funds. The FFMCs concerned will have to show evidence of compliance with all necessary requirements before.


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