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Unit trust funds FAQs

What are unit trust funds?

Unit trust funds (or mutual funds) are medium- to long-term investment products. They give investors the opportunity to diversify even a small investment in equities, bonds, currencies and commodities in markets around the world. This is achieved by combining the funds of many investors into a pool of funds, which can be spread over a number of different investments and over a wide geographical area. This range of investments is called a portfolio.

How will unit trust funds benefit me?

  • Spreading the risk: You spread your investment across a diverse portfolio. This is usually less risky as compared to investing in a single stock. Levels of risk and returns also vary between different funds
  • Professional management: Unit trust funds are managed by fund managers, who specialise in equity analysis and managing investments
  • Access to markets not easily accessible to individual investors
  • Economies of scale: With a large number of investors contributing to a single fund, operating costs and commissions can be amortised, making it possible for individual investors to pay lower fees
  • Liquidity: You can buy and sell unit trust funds on any dealing / business day (established in the respective fund’s prospectus). Your money doesn't necessarily need to be tied up only for a specific period of time
  • Higher potential returns: Some unit trust products help you gain exposure to high growth regions, sectors or asset classes. They could carry more risk than funds that are traditionally more diversified, but they potentially offer greater returns on your investment
  • You can also refer to the Federation of Investment Managers Malaysia’s ("FIMM") website for additional information

What are open-ended and close-end unit trust funds?

There are 2 types of unit trust funds in the market: open-ended funds and close-end funds.

  • Open-ended fund: This type of fund has no restrictions on the amount of units the fund will issue. When an investor purchases units in such funds, more units will be created to meet the purchase request. When investors redeem their units, the units will be cancelled. If the redemption amount is high, the fund manager may have to sell some of the fund's investments / underlying assets in order to meet the redemption request.
  • Close-end fund: This type of fund has a limited number of units. Unlike open-ended funds, new units will not be created by the fund manager to meet demand from investors. Closed-end funds are intended to be held by investors until maturity, as premature redemptions may incur an exit fee.

What are the different types of unit trust funds available through HSBC Bank Malaysia Berhad ("HSBC")?

We offer different types of unit trust Funds.

  • Equity fund: This type of fund generally invests in equities or securities of listed companies and is suitable for investors seeking capital growth over a medium to long-term period.
  • Balanced / mixed asset fund: This type of fund generally has a portfolio comprising equities, fixed income securities and cash. Such funds generally have a certain ratio of equity and fixed income securities that reflect either a moderate (higher equity component) or conservative (higher fixed-income component) orientation, and are suitable for investors seeking a potential regular income and modest capital appreciation over a medium- to long-term period.
  • Fixed income (or bond) fund: This type of fund invests primarily in bonds and other debt instruments. The exact type of debt instruments such funds invest in depends on their investment mandates or focus, but generally may include government, corporate, municipal and convertible bonds, along with other debt securities like mortgage-backed securities. These funds are suitable for investors seeking a potential regular income with less emphasis on capital growth.
  • Capital protected / non capital protected fund: A capital protected fund is a unit trust fund where the investor's principal amount is shielded from losses. A non capital protected fund is a unit trust fund where the principal amount is not protected, for example, an open-ended equity fund.
  • Islamic / Shariah compliant fund: A unit trust fund can also be categorised as an Islamic / Shariah compliant fund. The main objective of Islamic / Shariah compliant funds is to provide an alternative avenue for investors sensitive to Shariah requirements. An Islamic / Shariah compliant fund will exclude those companies involved in activities, products or services related to conventional banking, insurance and financial services, gambling, alcoholic beverages and non-halal food products. An Islamic/Shariah compliant fund must follow a variety of rules, including investing only in Shariah-compliant companies, appointing a Shariah Board, carrying out an annual Shariah audit and purifying certain prohibited types of income, such as interest, by donating them to a charity.

How is investing in unit trust funds different from investing directly in stocks?

Unit trust funds are actively managed baskets of stocks, designed to outperform a benchmark with the assistance of a fund manager. A unit trust fund generally holds a large number of stocks, where each stock may only comprise a small percentage of the portfolio. As a result, the portfolio is automatically diversified and comprises a large variety of stocks. Individual stocks, on the other hand, can be purchased by any investor through a broking firm, where the investor makes the ultimate decision in the stock selection. Investors who are interested in active trading may be better suited to invest directly in stocks. However, both investment products carry inherent pros and cons, which is why it's important for investors to understand the differences between them.

How do I buy/sell investment products through HSBC?

We offer a wide range of investment products for our customers to choose from, according to their investment objectives, financial situations, risk appetites and specific needs. Contact your Relationship Manager or your bank branch for an individual financial review, risk tolerance assessment and profiling of your investment preferences.

Can I invest online through HSBC?

Currently, this service is not available. Contact your Relationship Manager or your bank branch for a consultation on investment opportunities or methods.

How soon will I get my funds back upon redeeming my unit trust investment?

Redemptions are payable within 10 calendar days from the date the redemption request is submitted and the redemption price is based on forward pricing (the net asset value per unit at the next valuation point after the request is received).

What are the risks associated with investing in unit trust funds? Do all unit trust funds carry the same risks?

All unit trust funds are subject to investment risks, including the possible loss of the principal amount you invested. Different types of unit trust funds carry different levels of risk. Some are higher in risk than others. The general risks of investing in unit trust funds include: returns not being guaranteed, general market risk, security specific risk, liquidity risk, inflation risk, risk of non-compliance and manager/management risk. For further details / additional information on each type of risk, refer to each respective fund’s latest prospectus. A copy of the prospectus can be obtained from HSBC branches and the respective fund house’s offices. An electronic copy of the prospectus is also available on the respective fund manager’s official websites. You can also refer to the Federation of Investment Managers Malaysia ("FIMM") website for additional information on the funds.

Is there a currency risk associated with investing in unit trust funds?

Currency risk, also known as foreign exchange risk, is a risk associated with investments denominated in foreign currencies. A Malaysian Ringgit-denominated unit trust fund that has an investment mandate to invest offshore (for example, investing in global / regional market securities denominated in other foreign currencies), will be exposed to foreign currency fluctuations due to exchange rate movements between the Ringgit and that of the assets which are denominated in currencies other than the Ringgit. When the foreign currencies fluctuate in an unfavourable manner against the Ringgit, your investments will meet with currency losses, in addition to capital gains / losses. This may lead to a lower overall net asset value of the Fund.

What are the different fees and charges involved with unit trust funds?

There are 3 main types of fees and charges involved in a unit trust fund.

  • Initial service charge / sales charge / front end load: These are upfront costs that an investor incurs upon subscription / purchase. This type of cost is levied primarily to cover the marketing and distribution of the unit trust funds, as well as monitoring of the investor’s investments by the unit trust consultant for the duration for which the investment is held.
  • Exit fee: This fee is also known as a redemption fee, back end load or contingent deferred sales charge. The exit fee is charged to an investor for withdrawing the units prior to a previously stipulated date (for example: an exit fee of 1% will be imposed if the investor redeems funds within 6 months from the date of purchase). This fee represents a deduction from redemption proceeds by the fund manager. Normally, the exit fee charged is ploughed back into the unit trust fund.
  • Annual management fee: Management expenses include expenses for portfolio management, trustee and custody fees, audit fees, administrative charges like printing of annual reports, distribution management, postage and other services incurred in the administration of the unit trust fund. These costs are paid out of the fund's assets.

There are other direct and / or indirect fees and charges that may be charged to a fund. It's important for you to consider them carefully before investing in a fund. For further details / additional information on fees and charges, please refer to the respective fund’s latest prospectus.

Where can I see these charges?

All the fees and charges are available in the respective fund's prospectus, which you can find by accessing the 'Unit trust' section on our website. Alternatively you may also contact your Relationship Manager or visit any of our HSBC branches.

Where can I get information on the various unit trust funds distributed by HSBC?

You can access the 'Unit Trust' section on our website to see the full range of unit trust funds we distribute, retrieve fund information, download fund documents or perform an analysis and comparison of the funds.

Will HSBC provide me with regular statements for my investment?

Yes. We will provide you a monthly statement. You'll also be able to access your investment portfolio via HSBC Malaysia online banking.