Digital Investment Managers (DIM)
To promote the digital agenda for Malaysia’s capital market, the (SC) introduced the Digital Investment Management (DIM) Framework in May 2017 – the first such initiative in this region. The DIM framework represented a natural evolutionary step in light of Malaysia’s robust fund-management sector. It also paved the way for the advent of robo-advisors or digital investment managers (DIMs) in the domestic market, and fostered the creation of innovative and more efficient approaches of providing capital market products and services to investors.
To date, there are nine registered and licensed DIMs in the country:
Simply put, DIMs employ technologies to offer automated discretionary portfolio-management services. Their core services include risk profiling, suitability assessment, asset allocation and rebalancing – all of which are automated and algorithm-driven, with minimal human supervision. DIMS can replicate many of the functions performed by traditional fund managers. They typically offer several types of risk-weighted portfolios based on their clients’ various levels of risk appetite, assigning an appropriate investment portfolio based on the input provided. Investors’ risk appetite will be assessed and evaluated, either through online questionnaires or other online methods. DIMs will also undertake automated rebalancing and reallocation throughout the asset-management tenure.
The types of assets that DIMs may invest in include equities, exchange-traded funds (ETFs), mutual funds, bond funds, corporate bonds, government bonds, property/real estate, real estate investment trusts (REITs), commodities, money-market funds, currencies, cash and precious metals (e.g. gold). That said, what asset classes they invest in will depend on their respective investment strategies. Meanwhile, the investment portfolios recommended by DIMs are usually based on the client’s risk appetite (from very conservative to very aggressive), according to their responses to a series of questions before investing. They can choose to ignore the DIMs’ suggested portfolios and invest above or below their perceived levels of risk appetite.
As at end 2023, DIM AUM had grown 400 times to a value of RM1.6 billion with over 1 million accounts created. While DIM AUM constitutes less than 1% of total AUM in the fund management industry, there has been a steady upward growth trend with DIM AUM registering a 15% growth rate in 2023. Notably, the majority of these accounts (51%) were held by investors in their 20s with investment goals such as building personal wealth, education, or funding travel, weddings and other personal assets.
Market Development
Digitisation was amongst the main themes of the capital market in 2020 – a focus that was highlighted throughout the SC’s engagements with industry participants, specifically the Brokerage Industry Digitisation Group (BRIDGe) and the Fund Management Industry Digitisation Group (FMDG). BRIDGe aspires to facilitate collaboration amongst the regulators, the local bourse, brokers, banks and other stakeholders – with the goal of expediting the digitisation of Malaysia’s stockbroking industry. In 2019, the SC launched the FMDG to fast-track the digitisation of the fund-management industry, to enhance investors’ digital experience and improve the industry’s operational efficiency. The FMDG working group comprises members from the SC, Bank Negara Malaysia and industry members, i.e. fund distributors, fund managers and trustees.