As the financial crisis deepens, the number of domestic unit trust funds launched have shrunk. Year-to-date, only nine new funds have been launched compared with 21 funds in the same period last year.

“It is definitely a good time to launch new funds because valuations are low and the risk is now significantly lower compared to a year ago,” says Simon Chow, head of marketing and client services of CMS Trust Management Bhd. “But investors appetite have dried up and fund houses find it difficult to convince the investors towards their new funds during this bearish market.” Fund houses decide on new offerings based on their business goals and strategies, says Phua Lee Kerk, ceo of Pheim Unit Trusts Bhd. “Some might have implemented a ‘wait and see’ strategy while others might have decided not to launch based on feedback.” 

The new funds so far for 2009 are low volatility funds (i.e. bond, money market or capital-protected funds) while those launched last year were mainly equity funds. “The decline in the number of new funds and their low risk features reflect the prevailing difficult global economic environment, which is discouraging investors to invest,” says Eric Wong, head of research, Lipper Hong Kong.  Business volume is essential to create economies of scale, says Ho Seng Yee, executive director and CEO of OSK-UOB Unit Trust Management Bhd. “Since investors have become more guarded and fund houses are dependent on regular investors, this means smaller business volumes for fund houses and this has discouraged new product offerings.”  

The current market condition presents an opportunity for fund houses to check if their existing funds need a restructuring, says Ho. “Some fund houses have also taken the time to analyze the product gap to see if there’s any suitable product that is related to the environment.”  For example, OSK-UOB Unit Trust Management Bhd will be launching the OSK-UOB Energy Fund to capitalize on the opportunities prevailing in the global energy sector on March 23 (Monday). The fund is an open-ended fund, which aims to achieve medium to long-term capital appreciation through an investment in three underlying assets, namely the JPMorgan Commodity Curve Index Energy Excess Return (index), Energy Select Sector SPDR Fund (exchange traded fund) and Powershares WilderHill Clean Energy Portfolio (exchange traded fund) in the ratio of 60:20:20 respectively. 

A lack of new fund launches however, does not necessarily have an impact on investors. “You can concentrate on existing investment schemes with established track record, which suit your investment objectives,” says Chow.