Conventional Fund Management
Malaysia has a well-established fund management industry that caters to retail, qualified retail investors as well as institutional investors. The evolution of investment preferences and the dynamic nature of industry players have been a primary driver behind substantial growth in assets under management (AUM), contributing to a diversified landscape in terms of product offerings and intermediation capabilities.
In 2023, the domestic fund management industry remains a significant contributor to the overall resilience of the Malaysian capital market. As at end-December 2023, the domestic fund management industry’s AUM stood at RM975.48 billion, a 7.61% increase from the RM906.46 billion in the year before. Of this total, the funds invested domestically by fund management companies (FMCs) across the various asset classes amounted to RM646.19 billion, representing 66.24% of the total AUM. The asset allocation for investment locally continued to focus on equities, fixed income and money market, a similar trend in 2022. Almost half (48.7%) of these funds were invested in equities, followed by fixed-income securities (23%). In terms of share-of-market, it is worth noting that the top five fund management companies in Malaysia accounted for 53.87% of the industry’s total AUM (2022: 55.4%).
- Lock Company
- Be an entity incorporated in Malaysia
- Have at least 30% Bumiputera equity
- Not have more than 49% foreign equity
- Always have at least RM10 million of shareholders’ funds
- Foreign Company
A foreign company, on the other hand, must adhere to the following requirementss:
- Must have more than 50% foreign equity and be incorporated in Malaysia
- Must obtain a licence from the SC to undertake fund management activities
- Must have a paid-up capital of at least RM2 million
- Must conduct its operations from an office in Malaysia
- Must have a parent company or holding or related company with a sound track record in the international fund management industry
- At least 30% of its share capital must be held by locals if the foreign company intends to manage funds sourced from within Malaysia
- Must be 100%-owned by foreign interests if the foreign company intends to manage funds sourced from and on behalf of clients outside of Malaysia
The unit trust segment remained the key contributor of the industry’s AUM, comprising 51.3% of total AUM as at end-December 2023, with a net asset value (or NAV) of RM499.88 billion (2022: RM487.94 billion). In 2023, the percentage of the total NAV of the UTF industry against Bursa Malaysia market capitalisation was 27.83%. In terms of products, a total of 21 UTFs were launched while 17 funds were terminated, and 6 funds matured, bringing the total number of UTFs offered by 38-locally incorporated unit-trust management companies (UTMCs) to 757 funds as at 31 December 2023.
Eligibility Requirements for Fund Management Company
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A foreign company, on the other hand, must adhere to the following requirements:
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Market Development
In August 2023, the SC introduced the Foreign Exempt Scheme (FES) framework in line with measures to liberalise the fund management industry, providing high net worth entities and institutional investors greater onshore access to foreign investment funds. This included revisions to the Guidelines for the Offering, Marketing and Distribution of Foreign Funds (OMG Guidelines) and Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework. The revised OMD guidelines also allow secondary listing of non-plain vanilla foreign exchange-traded funds (ETF).
The SC also undertook the expansion of the Wholesale Fund Framework in 2023 to provide investors with access to a more varied range of alternative assets and strategies. This expanded framework enables domestic fund managers to invest in alternative investment products via special purpose vehicles, in addition to the available conventional assets, such as securities, derivatives, money market instruments and deposits. Fund managers will be required to provide an offering document, setting out information that would facilitate comparability between funds to enable investors to make informed decisions. To unlock the growth potential of Exchange Traded Funds (ETFs), SC sought to enable greater flexibility and choice by allowing foreign Exchange Traded Fund (ETF) operators to apply for secondary listing of up to five non-plain vanilla ETFs such as leveraged ETFs, inverse ETF and synthetic ETF.
The SC issued the Guidelines on Sustainable and Responsible Investment Funds in 2017, to promote the growth of SRI funds in Malaysia. The Guidelines, applicable to both conventional and Shariah-compliant funds, allow them to be designated as SRI funds and broaden the selection of SRI products in the market, thereby attracting more investors to the SRI sphere. They cover funds under the SC’s purview (e.g. unit trust funds, REITs, ETFs, and venture capital and private equity funds) and encompass additional disclosure and reporting requirements, to encourage greater transparency in the investment policies and strategies of SRI funds. To facilitate the development of the unit trust fund industry, the SC undertook a comprehensive review of the Guidelines on Unit Trust Funds at the end of 2019. The issuance of a public consultation paper to seek feedback on its proposals followed in November 2020.
In November 2019, the SC launched the Fund Management Industry Digitisation Group (FMDG). The objective was to accelerate the digitisation of the fund management industry, to enhance investors digital experience and improve the industry’s overall operational efficiency. The FMDG working group is made up of members from the SC, BNM and industry members comprising fund distributors, fund managers and trustees. The SC also facilitated the offering of fractional trading on shares listed on Bursa Securities by stockbroking companies as part of its capital market initiatives to improve investors’ accessibility to the domestic stock market and to make investment more affordable for Malaysians. These efforts by the SC aim to ensure an effective regulatory regime that facilitates product innovation while fostering an inclusive investment environment for investors with various risk appetites and needs.