The investment management industry is even more globally focused as it faces emerging capital markets, deregulation and tremendous advances in technology. In Malaysia, the industry is expected to undergo further liberalisation and streamlining over the next three to five years with the implementation of the recommendations in the Capital Market Masterplan 2001.
Malaysian Investment Fund Market
Malaysia is a pioneer in the region with the establishment of the first unit trust in 1959. In the 1990s, the investment management industry experienced real growth with the liberalisation of guidelines that govern unit trust and asset management companies in Malaysia. Among others, there were liberalisation measures on foreign ownership in unit trust management companies and on the outsourcing of the management of insurance companies' investment funds to external fund mangers. As of June 2002, total funds managed amounted to RM61.28 billion (1USD = RM3.80) comprising 93.8% of local funds and 6.2% of foreign funds (Source: Securities Commission)
Foreign Asset Management Industry
A fund management company incorporated in Malaysia is a company licensed under the Securities Commission Act and maintains a minimum paid-up capital of RM2 million. Companies are regulated under the Securities Commission Act 1993 (SCA), Securities Industry Act 1983 (SIA), Companies Act, 1965 as well as Circulars and Directive's issued by the Securities Commission (SC) to investment management companies.
What then, is classified as a foreign fund management company? A foreign fund management company is a company with more than 50% of its equity being foreign-owned and incorporated in Malaysia. Leading global players in the Malaysian market include Salomon Smith Barney and JP Morgan Fleming.
In Malaysia, foreign asset managers account for nearly 20% of the industry players and their participation takes place mainly through joint ventures with local partners. While local funds have increased by 32% during the 12- month period leading up to June 2002, foreign funds have followed the upward trend with a 42% increase.
An Ethical Culture
For investment management companies, an ethical culture is essential to preserving the investor trust that has enabled the industry to flourish. Implementing this ideal, however, is becoming more of a challenge today than in years past. The Internet and related technologies are introducing new ways of doing business, new products, and new markets - at a pace that regulators are hard pressed to match. Globalisation present the challenge of implementing consistent ethics and core standards across multiple locations.
The Malaysian market is dominated by the unit trust industry with RM55.1 billion as at August 2002. Although 1997 saw a 50% decline in Net Asset Value (NAV) due to the Asian financial crisis, the local unit trust industry bounced back with a positive 9.4% growth in 2001 and 16.4% as at 31 August 2002. Here, the Government has a pivotal role, sponsoring around 66% of the industry's NAV (Source: Federation of Unit Trusts Managers
). Types of unit trusts include Equity Unit Trusts, Islamic Unit Trusts, Balanced or Diversified Unit Trusts and Speciality Unit Trusts.
Offshore Fund Management in Labuan
Development and Market Size
Labuan is an International Offshore Financial Centre (IOFC) in the South East Asian Region and a Federal Territory of Malaysia under the administration of the federal government in Kuala Lumpur. The Labuan Offshore Finance Services Authority (LOFSA) was set up in February 1996 to promote and develop Labuan via the creation of a complete financial supermarket including the development of financial instruments compliant with Islamic law and providing a legal framework conducive of the development of the offshore industry. In 2001, Labuan continued to attract investors and saw a 30% growth in terms of newly set-up companies (Source: LOFSA)
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