But of course, don’t get the wrong idea. The fund managers are not to blame here as you’ll find later in this article - *cough the global pandemic Covid-19 that’s still currently happening is to blame.
Still, with this worrying trend, is the future bright for ASB or should you park your money somewhere else? Time to find out.
For those of you who have no idea on what’s happening, let us bring you up to speed
On 23 December 2020, PNB Chairman, Tan Sri Zeti Aziz announced the lowest ASB distribution ever in history: At 5 sen per unit which involves a total payout of RM7.6 billion to more than 10.2 million unitholders.
This, she said, was a competitive figure that ASB continues to give despite the market environment is still unstable. And she’s right, we can see ASB’s performance is quite okay especially in comparison to other low-risk investments.
The fact that ASB can still give a return of 5 sen a unit despite the market downturn and a global pandemic is quite an achievement in itself.
If you’re wondering how that is possible, well, Zeti gave a rather good explanation about PNB investment strategy. In her speech, she was quoted as saying: "ASB’s portfolio diversification strategy has continued to see progress in 2020, with increased exposure to international equities, private equity, real estate and fixed income."
So, what does that mean?
It means they don’t just invest all the funds in the Malaysian market, but they are increasing the fund allocation to foreign investment, among many others for a stronger return.
Here’s how the ASB fund is invested(Since PNB hasn't come out with the ASB full report for 2020 yet, we’ll do the calculation based on the 2019 report instead.)
According to the report, the top 3 sectors that they heavily invest in are Monetary Sector (26.17%), Consumer Goods (14.25%), and Communication Services (8.25%).
They also listed the companies that they invested in, with the top 3 being Maybank (21.83%), Sime Darby Plantation Berhad (10.7%) and Tenaga Nasional Berhad (4.48%).
So, the return of your ASB is heavily influenced by the performance of these companies.
If you want to understand how PNB came out with the 5 sen a unit in distribution, this is how it's calculatedThere’s a formula that PNB uses to calculate the ASB dividend, which is called Net Asset Value per unit.
According to Investopedia, the Net Asset Value is arrived at by dividing the difference between assets and liabilities by the number of shares/units held by the investors. So liabilities are all the fees involved to manage the fund diligently.
So, what is Net Asset Value?
So for ASB funds, PNB charges 0.6% (0.4%+0.2%) in fees from total assets under management to manage the fund diligently.
You can find the exact figure inside the report but you can also estimate the rough dividend for that particular year by dividing the Total Sum of Distribution income with the total Unit In Circulation.
For example, in 2019, the Total Distribution Income is RM8,136.74 million while the total Unit In Circulation is 167,159 million.
The math would be RM8,136,740,000/167,159,000 = 0.048 which is around 4.8 sen.
As for the 5 sen, it was reported by The Malaysian Reserve that the Total Distribution Income is RM7.6 billion while the total Unit In Circulation is 173.2 billion.
Using the same calculation (RM7,600,000,000/173,200,000,000), you’ll find that the dividend comes up to 0.0438 which is around 4.38 sen per unit.
As for calculating the amount of return that you get from your ASB investment, you can read this ASB article to find out.
Able to catch up so far?
We know it's very confusing to crunch all these numbers. That’s probably why we better leave the job to the professional fund manager at PNB.
First of all, for as long as the return on ASB beats the inflation rate, it’s still a good investment. Currently, the inflation rate in Malaysia is -1.7% as of November 2020, so to have a 5% return on your ASB investment is still a good thing.
So, is it still a good idea to invest in ASB?
What about the future performance of the fund?As we said previously, the fund’s performance is highly dependent on the performance of the companies that the fund invests in.
For example, if you take a look at ASB fund performance from 2014 to 2016, you can notice that the dividend becomes lower as the companies that ASB fund invested in reported a lower earning.
* The figure is calculated based on shareholder report of each company.
So, if you want to predict the outcome of future ASB dividends, you’re gonna have to put on your investor’s cap and look into each of the companies that ASB invested in. Perhaps for a start, you can look into this guide from Mckinsey, which shows you various metrics and factors to measure a company’s performance.
Of course, there are plenty of options. Because here’s one thing you should know. ASB is only for Bumiputera right? Yet, the Chinese and the Indian still managed to find ways to be rich.
Is there a better alternative to invest my money?
If you’re friendly with the Chinese, chances are you would hear the same advice from the aunties and uncles:
“Invest in property and the stock market.”
Their advice is dead simple. And guess what, they work.
Because the secret of investment is really about investing your money into assets that appreciate over time.
If you take a look at the top Malaysian billionaire and their source of wealth, you can see that they all have their foot sunk deep into property investment and also owning stocks of various companies.
So, if you also want to follow their footsteps and own stocks as well, you can start by investing in a unit trust fund. Just take a look at the performance of some of these trust funds in Malaysia. The return on investment is insanely over a long period of time!
So, whether or not you’re a Bumiputera, you should park your money in property and these funds and have it grow over time.
But, as always, you must always do your due diligence before investing money into something that you’re not familiar with!