Understanding Unit Trust Funds
Understanding Unit Trust Funds

Understanding Unit Trust Funds

Last Updated on Monday, 7 June 2021 by Zhen Thing

This blog will help you understand the unit trust funds in Malaysia. Know the difference between unit trusts and mutual funds and how to invest in them.

Table of contents :
🏡 What is a Unit Trust Fund?
🏡 How Does Unit Trust Work?
🏡 Unit Trusts vs Mutual Funds
🏡 Benefits of Investing in Unit Trusts
🏡 Risk of Investing in Unit Trusts
🏡 Facts About Unit Trusts
🏡 1. Ownership & Rights
🏡 2. Payout
🏡 3. Fees
🏡 4. Investment Fund Types
🏡 5. Investment Strategy
🏡 How to Invest in Unit Trust?

What is a Unit Trust Fund?

In short, unit trust means that you put your money in a mutual fund, and fund managers invest it for you for a fee. Simple.

Unit trust funds pool investors’ money to invest in profitable markets like shares, bonds, money market, etc. These funds are managed by professional fund managers and have different investment strategies for each fund. Since unit trusts invest in these markets, they can provide one of the most secure returns. On the contrary, they are highly dependant on the current market and economic situations. Therefore, you could get high returns on a booming economy year, vice versa. Comparatively, unit trusts are less risky than stocks because the funds are managed by fund managers, while market stocks require you to monitor the market situation consistently.

Stock investors buy shares to invest in the stock market, while in a unit trust, you buy units. Unlike stocks, you have no voting rights as a unitholder. A share of a unit trust fund represents investments in various securities depending on the fund’s nature.

How Does Unit Trust Work?

Unit Trust Fund Structure
Unit Trust Fund Structure

A unit trust scheme is a form of collective investment scheme regulated by the Securities Commission Malaysia (Suruhanjaya Sekuriti).

SC regulates all matters relating to the unit trust industry and ensures all staff comply with the securities laws. Also, it licenses and supervises all licensed people under securities laws.

1. Management Company (Fund House/Manager)

UTMC (Fund Manager)

UTMC is registered with Suruhanjaya Syarikat Malaysia (SSM) and approved by Securities Commission (Suruhanjaya Sekuriti).

Firstly, it reports to the Trustee regarding all unit trust investments. It promotes and issues the units of a fund and services the unitholders.

The management company also operates and manages the fund — distributes income, calculates the unit price.

2. Trustee


The trustee is a company independent of UTMC and also approved by Securities Commission (Suruhanjaya Sekuriti).

Firstly, it reports to Unitholders and SC. It acts as a custodian of the funds. In order to safeguard the assets of the Unitholders, the assets & investments of the unit trust scheme are held under the Trustee’s name.

Lastly, it monitors and approves all financial transactions and ensures funds are invested in accordance with the deed & objectives.

3. Unitholders (Investors)

Unitholders are investors who own the fund in the form of units. Investors will receive income distribution and capital gains.

Parents may also start an investment for underaged children as a form of savings for their children’s future.

Unit Trusts vs Mutual Funds

In Malaysia, we define Unit Trust and Mutual Funds as the same thing. That is why you would always hear Unit Trust Consultants using unit trust and mutual funds interchangeably. Since the MCO in March 2020, unit trusts have become more popular than conventional schemes like Fixed Deposits (FD) due to their flexibility and returns being more promising than FDs.

Benefits of Investing in Unit Trusts

1. Professional ManagementProfessional fund managers manage your funds with expertise and resources.
2. Low Initial InvestmentSome funds offer initial investment as low as RM100. It’s a good investment opportunity for small investors.
3. Liquidity – Ready Access to FundsUnitholders may redeem all or some of their units on any business day and receive your funds within 10 calendar days.
4. DiversificationYou may spread investment risks over a wide range of portfolio asset classes (stocks, bonds, money market).
5. Investment Exposure– Exposure to domestic and foreign markets which are out of reach of investors with small capital or without the right resources and experiences.
– Access to securities that need high capital outlay, such as Malaysian Government Securities (bonds).
6. Ease of TransactionsDo not require loads of paperwork or record keeping of unitholders in managing your investments.
7. Able to Apply Dollar-Cost Averaging (DCA)Dollar-Cost Averaging method :
– Investment into Unit Trust Fund on a regular basis (usually monthly).
– Invest with a fixed amount.
– It helps lower the Average Cost per Unit in the long run, and there is no need to time the market.
8. Cooling-off PeriodIf there are any errors or doubts to reconsider your investment purchase, you may exercise this right within 6 business days after the first investment made. The investor will get a full refund.
*Only for first-time investors except for corporation or institution*

Risks of Investing in Unit Trusts

In all investment-related industries, the factor for investors to consider before making an investment decision is RISK.

The higher the risk, the higher will be the potential return; the lower the risk, the lower the return. Investors should consider their risks before investing.

Funds Risks

1. Market Risk

Equities consist of high risk since they invest mostly in stocks. The Net Asset Value (NAV) of a fund fluctuates in response to the economic conditions, individual companies, general market, etc. Investing in high-risked funds mean that you are at exposure to market risk.

2. Interest Rate Risk

Interest rate movements will impact the stock & bond market. Stock & bond prices move inversely with interest rates. When the interest rate is high, people would be more interested in the money market. Therefore, stock & bond prices will be lower.

3. Country Risk

Funds that invest in foreign investments may be affected by the economic & political conditions of the country where the funds invest. If the economic and political conditions are unstable in the country(s), businesses and financial markets may not be doing very well. Thus, it will affect the performance of the particular fund.

4. Currency Risk

If the economic and political conditions are unstable, it may also affect the currency of that country. Funds that invest in a foreign currency or assets denominated in a foreign currency are at risk for currency fluctuations.

5. Risk of Shariah Non-Compliance

The risk that the current Shariah-Complaint Funds may be reclassified as Shariah Non-Compliance.

Facts About Unit Trusts

Known Unit Trusts

One of the most established and popular mutual fund companies in Malaysia is the Public Mutual Fund (was KL Mutual Fund), managed by Public Mutual Berhad (a wholly-owned subsidiary of Public Bank).

Ownership & Rights

The ownership of the unit trust funds divides into units. Therefore, investors are known as Unitholders. As mentioned previously, first-time investors may exercise their Cooling-Off Right within 6 business days to get a full refund if you want to reconsider your investment purchase.

Apart from that, while investing in Unit Trust, you will receive the Unit Trust Scheme’s annual & interim reports. Finally, you can also call for a meeting with the Unit Trust Management Company (UTMC) to understand more about your investment market.


The returns from the funds are in the form of either a Distribution or Capital Appreciation. You can request to either get the returns paid out to your bank account (Distribution) or reinvest the returns to increase your capital (Capital Appreciation). By default, the returns are usually going to reinvest to gain more returns in the future. Otherwise, you could request it to pay out to you. Your Unit Trust Consultant will guide you on this step.


The fees mentioned here are based on the fees charged by Public Mutual Berhad. There are two types of expenses for portfolio management in the Unit Trust Scheme, one-off and recurrent fees. These fees are paid out of the fund’s assets, so you do not have to pay it out of your wallet.

One-off Fees :

  • Service Charge – charged during the initial investment (0-5% depending on the fund type).
  • Transfer Charge – administration fee of up to RM50 is charged for each transfer transaction.
  • Switching Charge – charged when switching funds within Public Mutual (usually around RM50+- *exempted for Public Mutual Gold investors).

Recurrent Fees :

  • Management Fee – 0.375-1.9% per annum (depending on your investment fund).
  • Trustee Fee – 0.02-0.06% per annum (depending on the fund type).

Take note : NO Redemption Charge when you redeem your units.
***Initial Service Charge is also known as Sales charge, Upfront charge, Entry charge.

Investment Fund Types

Unit Trust offers a wide range of funds, such as Shariah-Compliant Funds, Equity Funds, Mixed Asset Funds, Bond Funds, Money Market Funds, REITs, etc.

Investment Strategy

Unit trust is usually a long-term investment, in some cases, short-term.

Money Market Funds1-2 years
Bond Funds3-5 years
Equity/Mixed Asset Funds5 years and above

As you know, equity funds are high-risk funds with high returns. The longer you keep your money there, the better the returns you will make. If you want to cash out your investment for equity funds in the short term, you may not enjoy many monetary benefits.

However, if you have an emergent situation that you need to cash out the funds, you may do so since Unit Trust offers the flexibility to cash out anytime. Your funds will pay out within 10 calendar days.

How to Invest in Unit Trust?

Investing in Unit Trusts are usually through Unit Trust Consultants/Agents (UTC), Unit Trust Agency Supervisor (UT-AS), Unit Trust Agency Manager (UT-AM), Unit Trust Group Agency Manager (UT-GAM), or on Public Mutual Online website. Either way, you still need a UTC to guide you through the steps in invest. UTC will also help you monitor your funds and advise you if you need to switch funds during a market downturn.

You may contact us if you have further questions on how to invest in Unit Trust. We are happy to attend to your enquiries.

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