Keynote Address at the FIMM Annual Conference 2024

Speaker: Puan Salmah Bee Mohd Mydin, Executive Director, Market Development, Securities Commission Malaysia

Location: Kuala Lumpur
Delivered: 12 September 2024

Bismillahirahmanhirahim
Assalamualaikum warahmatullah wabaratuh, Salam Sejahtera.

Yang Berusaha Mr Mohd Ridzal Mohd Sheriff, Chairman of Federation of Investment Managers Malaysia (F-I-M-M),

Yang Berusaha Mr Kaleon Leong, Chief Executive Officer, F-I-M-M

Board of Directors and the Management of F-I-M-M,

Distinguished speakers,

Members of the media,

and participants of FIMMAC.

Ladies and gentlemen,

My thanks to the organisers, the Federation of Investment Managers Malaysia (“FIMM”) for providing me the opportunity to deliver the keynote address at your 2024 conference.
In setting the theme of this year’s conference “Innovate & Invest”, FIMM has set a high bar for the investment management industry and all the professionals working in it. It is a challenge to both firms and individuals in the industry to always stay current but equally importantly to constantly cast your eyes into the horizon and future proof your businesses.
It’s also a theme that the SC embraces, in implementing our regulatory and developmental priorities in the fund management and financial planning segments, which are important segments within the capital market.
Today I would like to share the SC’s thoughts in 3 main areas –
Firstly, the state of play of the fund management industry
Next, some of the regulatory architecture that the SC has put in place to meet changes in how investment products and services are offered in the industry, in part due to investor demand
Finally, principles that will continue to drive SC’s developmental and regulatory effort to support growth in this segment

State of Play
Ladies and gentlemen,
Since February of this year, the fund management industry recorded a decisive achievement, crossing the trillion-ringgit mark on the back of a strong equity market performance, particularly valuation in the US market.
This industry has grown steadily over the past decade, as reflected by the growth in assets under management of more than 65% to RM 975.5 billion in 2023 from RM 588.4 billion in 2013. Over the same period, we have seen the industry’s AUM continue to be well-diversified among various asset classes and into regional and global markets.
We know that a significant portion of the fund management industry, just over 50% is represented by the unit trust industry, with over 760 funds that has a wide range of offerings including domestic equity, global multi thematic, China focused funds, balanced and aggressive funds. The unit trust industry is the backbone of the fund management industry.
Another trend we have seen is the growing allocation to foreign markets as a fund managers search for better yields, with RM718.2bil (67%) invested domestically while RM351bil (33%) are invested outside the country. A similar trend is also seen in the unit trust industry, where between 2017 to 2023, we saw not only a consistent increase in the number of funds investing abroad but also growth in the total investment amounts. In 2023 alone, RM135.76 billion of the RM499.88 billion in unit trust fund NAV, was allocated outside Malaysia, representing a 2.5-fold increase compared to 2017.
This growth underscores the industry’s drive to diversify portfolios and seize growth opportunities in global markets, particularly in Asia Pacific and North America. These strategic investments are essential to provide investors with the most optimal risk-return for their wealth accumulation needs.

Ladies and gentlemen,
The fund management industry has remained fairly concentrated among few large players, with the composition and concentration of the largest firms remaining the same over the past 6 years.
Between 2018-2024, the industry saw growth as the number of UTFs offered grew by 18% to 764. Similarly, total NAV grew by 28% to RM 545 billion. Meanwhile the industry saw a 23% growth in the number of accounts totalling 26 million over the past 5 years.
This widening nature of funds on offer by the industry and increase in number of accounts is testament to the investments into systems and people by the firms in the fund management industry and their acknowledgment of the need to constantly evolve and innovate to meet changing investor demand.
Today, Malaysia’s fund management industry stands as the second largest in ASEAN and serves the needs of 13 million unique investors. It has certainly made significant contributions to the Malaysian capital market by widening the ownership of assets and generating returns on long-term savings. However, the Malaysian investor is certainly not a homogenous group, each with distinct financial security and investment needs and divergent financial and investment literacy.

Regulatory architecture
Ladies and gentlemen,
As I mentioned at the start, the challenge to innovate and invest is one that also confronts the SC. As we look at the regulatory architecture of the investment management industry, we have focused on enabling an industry that can adapt to changing investor behaviour and demand and responding to shifts in the environment.
The SC’s commitment remains to having a comprehensive, inclusive and multi-tiered investment management ecosystem with the presence of a variety of firms with different operating models, that can build, grow and serve a range of investors.
We have put in place regulatory framework that enables the offering of a range of investment management services. This includes unit trust management companies creating unit trust funds at the end of one spectrum to portfolio managers and boutique fund managers advising and investing for sophisticated and high-net worth investors at the other end.
Other business models that have been permitted include Digital Investment Managers which offer algo based investment solutions powered by technology. Almost a cross between fund managers and financial planners, these robo-advisors are meant to provide an opportunity for Malaysian investors to have an investing experience premised on low-cost small investment size approach.
It has been the SC’s intent to have this category of fund managers complement the activities of the unit trust management companies in bringing in new and younger investors with a positive investing experience. While investors are focused on returns, the investing experience cannot be underestimated.

Increasing retirement awareness
Ladies and gentlemen,
As you continue to innovate and invest for the sustainability of your business, let us be reminded of an increasingly important concern in the retirement space that necessitates your attention.
As you may be aware, population ageing is a phenomenon that majority of countries globally are facing. The reality of retirement is daunting for Malaysians with the World Bank estimating that the Malaysian population above 65 will constitute 13% in 2040 and 17.4% in 2050. That is 5 million and 7 million individuals respectively, from the current 3 million.
Given this demographic shift, there is a need for collective effort to increase awareness of importance of saving for retirement and for greater innovation that can help Malaysians save for retirement. This includes decumulation options to mitigate longevity risk of outliving retirement savings.
Fund management companies and financial planners are key intermediaries and play a crucial role in guiding Malaysians through the retirement journey. SC recognises this and the importance for more innovative decumulation solutions that can help retirees efficiently manage and draw down their accumulated savings. The SC is open to facilitating such innovation and, in this regard, I would like to invite interested parties to discuss these with the SC.
In the meantime, other developmental efforts undertaken by the SC include working closely with the Ministry of Finance (MoF) to introduce policies to facilitate and attract the setting up of family offices in Malaysia. As with other jurisdictions, the establishment of family offices in Malaysia is likely to benefit the fund management industry in increasing the assets under management as well as providing positive spillover effects. Local fund managers would be able to offer diverse investment strategies to cater to these specialized needs compared to traditional institutional investors. The presence of family offices would also contribute to the overall deepening of the ecosystem.
The way forward is anchored on ensuring investors are provided choice of investment and advisory services, value for money options, opportunity for better returns and convenient access and positive investing experience.

Principles
Ladies and gentlemen,
The final area I would like to briefly touch would be some of principles is central to the SC in our developmental and regulatory approach. To encourage a strong and well-regulated fund management industry, capital market regulators around the region and elsewhere have focused on principles that promote transparency, investor protection, market integrity, good conduct and ethical practices.
These will remain the key principles that can guide our developmental and regulatory efforts. While innovation is necessary to ensure relevance and long-term business sustainability, a crucial additional element is trust. Firms need to build and earn this by upholding good practices and high standards of conduct.
The SC and FIMM have been working together on enforcement to reduce investors’ complaints and elevate standards of conduct. Nevertheless, we look to the captains of industry to set an example and ensure the highest standards of conduct within your firms and across the capital market.
As you would be aware the SC had issued new Conduct Guidelines to elevate standards of professionalism and integrity amongst capital market intermediaries. These revised guidelines reinforce the role of an intermediary’s board and senior management in inculcating a corporate culture, where clients’ interests are prioritised. It also clarifies the SC’s expectations on an intermediary’s duty to act honestly and fairly, without misleading or deceiving clients.
Investor centric approach and standards must be applied across all dealings with investors including transparent disclosure of fees and conflicts particularly with growing adoption and reliance on technology.
The SC remains committed to encouraging innovation and adopting a proportionate approach to regulation. In this regard, open dialogue and a feedback loop with industry to continually assess the effectiveness of regulations is welcomed.
Let me close with a reminder to you and I that as we aim to continue to innovate and invest, challenges will be a constant in our path.

YANG BULAT TIDAK DATANG BERGOLEK, YANG PIPIH TAK AKAN DATANG MELAYANG
But as firms and individuals who embrace progress and technologies as well as invest in strategy, infrastructure, process, people, you are well-positioned to deliver strong investor experience, foster deeper relationships, and maintain an edge in an increasingly competitive environment.
I wish you all the best in this journey.