Alpha is defined as excess returns obtained as a result of certain investment strategies undertaken by a fund. One of the strategies for a fund to achieve alpha or excess returns is via ‘focus investing’ which involves maintaining a concentrated portfolio of stocks that are expected to outperform the broader market over time.
In contrast to general equity funds which hold a broader portfolio of 60 stocks or more, funds which practice focus investing provide investors with the opportunity to participate in higher potential returns over the medium to long-term due to the concentration of stocks. In general, these funds are suitable for investors with higher risk profiles as the fund’s concentrated portfolio may result in increased volatility over short-term periods.
Public Islamic Alpha-40 Growth Fund (PIA40GF) is an Islamic equity fund that seeks to achieve capital growth by investing up to a maximum of 40 Shariah-compliant stocks listed in the domestic and regional markets. The fund is able to adopt a more focused investment strategy and achieve potentially higher returns as it concentrates its investment in a portfolio of not more than 40 stocks. To achieve increased diversification, the fund may invest up to 30 percent of its net asset value (NAV) in regional markets.
On the economic front, Malaysia’s economy is expected to rebound by 6.8 percent1 in 2010 from a contraction of 1.7 percent1 in 2009 following a recovery in the manufacturing and services sectors. However, Gross Domestic Product (GDP) growth is envisaged to moderate to 5.2 percent1 in 2011 as export growth moderates. However, on the domestic front, investment and consumer spending is envisaged to be resilient amidst an environment of accommodative interest rates, rising disposable incomes and favourable demographic trends.
The local equity market is supported by fair valuations and sustained domestic liquidity. Despite the FBM KLCI rising by 15.8 percent1 for the year-to-date to 1,466.97 points on 17 September 2010, the local stock market is trading at a prospective P/E of 14.1x1 on 2011 earnings, which is below the market’s 10-year average P/E ratio of 16.5x1. The local market is also supported by a gross dividend yield of about 3.6 percent1, which is in line with the 10-year average of 3.5 percent1 and exceeds the current 12-month fixed deposit rate of 2.85 percent1.
1 Bloomberg, September 2010
You are advised to read and understand the contents of the
Prospectus of Public Islamic Alpha-40 Growth Fund and
Public Islamic Infrastructure Bond Fund dated 16 November 2010 before investing. The prospectus has been registered with the Securities Commission who takes no responsibility for its contents, and neither should its registration be interpreted to mean that the Commission recommends the investment.
You should note that there are fees and charges involved; and that the prices of units and distribution payable, if any, may go down as well as up. Past performance of a fund is not an indication of its future performance. Applications to purchase units must come in the form of a duly completed application form referred to in and accompanying the prospectus. A copy of the prospectus can be obtained from your unit trust consultant or nearest Public Mutual branch.
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