Capital Guaranteed Fund II

In Malaysia, typically fund will charge 5- 6.5% of fund’s Net Asset Value (NAV) as sales load. That means $100 you invested, only $95 - $93.5 is invested for you by fund managers. The remaining $5 - $6.5 is paid to their sales force and admin fee. Thus, by investing in the fund with same amount compared to the one, John who does it by his own, to achieve same result after a year, say 10% return of $100 investment, you need not 10% return but roughly 16% return! Table illustrates the scenario:

John $100 $110 10% annual return
You $95 $110 16% annual return

It likes a 100m race where John starts at 0m but you start at -5m and assuming both of you have similar accelerating power, who will be the winner is no doubt in question.

Second part of income generated for fund management is through management fee. In Malaysia, typical rate is 1.5% NAV per annum. Putting DUT Fund as an example, with RM 300 million at the beginning of the year, assuming there is 0% return at the end of the year, its NAV will be RM 285 million (RM 300 million – (RM 300 million * 5%)). Thus, its first year management fee would be RM 4.275 million. What’s the management fee for the remaining 2 years? RM 4.21 million and RM 4.15 million. Total management fee for entire 3 years is RM 12.64 million. Good business, isn’t it? At least for the fund management. What’s investors get after 3 years maturity? From RM 300 million at the beginning of the fund launching, investors left with RM 272.36 million (RM 300 million – RM 12.64 million – RM 15 million).

You will wonder why investors left with RM 272.36 million while at the same time, the fund is guaranteed for its capital of RM 300 million? That’s the difference occurs when we are talking about PRESENT VALUE and FUTURE VALUE.


To find out PRESENT VALUE and FUTURE VALUE, click a link below:
Financial Calculator