CHAPTER I

INTRODUCTION
1.1 Research Background
A considerable attention in academics and policy making has recently been received
by Islamic finance. It started in the form of commercial banking three decades before where
the financial activities compliant to Islamic Sharia and which have spread to project finance,
investment banking, capital markets, insurance and micro-finance and wealth management
(Mansur and Bhatti, 2011). From the view of growth, 15-20% per annum has currently been
the growth of the market for Islamic investment product (Financial Times and Stock
Exchange International Limited, FTSE, 2009). The capability of the Islamic banking and
finance has been focused by current research effort as an alternative to the conventional
banking and finance. Compared to conventional counterpart the Islamic banking and finance
industry is in really early stages of development. Preparing the industry-players and
policymakers with the needed information to participate in the industry is in need of the
significant investigation (Abdullah, 2008). The Islamic unit trust fund is one of the products
of the Islamic banking and finance industry that has really focused the significant attention as
reflected by its very rapid growth is the Islamic unit trust industry. In the Malaysian capital
market, unit trust also plays an important role. They are really the major players in the capital
market that they are attracting small investors to capital market (Elfakhani, 2005).
On 31 Dec 2014, the asset allocation inside and outside of Malaysia was rm629.93
billion overall (including Shariah) but rm110.6 billion was only for Shariah (Abdul Rashid,
2005). The positive growth of the unit trust industry in Malaysia has been introduced in
Amanah Saham Nasional and Amanah Saham Bumiputra in 1980 and 1990
respectively .Mutual fund or so called unit trust fund in Malaysia is an investment system. It
pools money from many investors who want to share the same financial objectives,
investment strategy and risk tolerance. The pooled money is invested in a diversified
portfolio and that is called authorized investments approved by the Securities Commission
(Kabir Hasan et al, 2010). The authority promises to investors that investors will gain various
benefits of investing in a unit trust fund such as diversification, liquidity, professional
management, and risk minimization. However, tremendous expansion was shown by the
Malaysian unit trust industry. Over the last few years, the Malaysian Capital Market is going
to be experienced with a very encouraging growth. Based on the needs of Malaysian
investors, there were various financial investment products introduced to supply. However,
1

the interesting thing is that the majority of Malaysians are Muslim thats why Islamic
financial products are highly demanded (Anwar and Tahir, 1995). The capital market does not
conform to the Islamic principles which are not prescribed by the Holy Quran and AlSunnah because the capital market is functioning based on interest. For this reason, Muslim
investors are not willing to come into the capital market openings (Yahya, 2004). Reacting to
the requirements, in 1983, the government has taken the initiative to develop the first Islamic
bank, namely Bank Islam Malaysia Berhad (BIMB), followed by the Kuala Lumpur
ShariahIndex (KLSI) in 1999. Malaysia has witnessed the active involvement of Islamic
Capital Market (ICM) through the result of an emerging of Islamic banking and financial
sector. The objective of ICM is that they need to fulfil the investment needs of Muslim
investors (Low, 2007).
Nowadays, in the market, Islamic unit trust fund has established as an Islamic
financial products. These funds are operated in compliance with the Shariah(Islamic law)
principles. On the 1st March 1993, the Securities Commission (SC) was established and that
was the introduction of unit trust funds to the ICM. In the establishment of SC, they need to
promote and to maintain blond, competent, secure and transparent securities and future
markets and also they need to facilitate the orderly development of an innovative and
competitive capital market (Hayat, 2011). Based on the responsibility of the SC, they must
supervise and regulate all issues related to unit trust schemes as well as the trust fund
companies and the investors. Based on the recent market performance, if we compare both
Islamic and Conventional Unit Trusts in Malaysia, we can find out that investing in Islamic
unit trusts is up to the contractual relationship between a unit trust company and the
respective investors (Ferdian, 2007). There is an Islamic unit trust component, which is
required to have their own Shariahboards consisting Islam law scholars and experts to advise,
monitor and ensure that the investment operations and portfolios are managed in compliance
with Shariahprinciples in all investment companies (Ismaila, 2003). The growing statistical
figure year by year is generated by the remarkable expansion of this industry. Increasing
demand for units, tremendous growth of the NAV of the unit trust funds owes and launches of
new products and optimistic market conditions. In the most recent statistics, we can find the
relationship of collective investment scheme with the total amount of unit trust funds (Nathie,
2008).
Now, we would like to analyze about the comparison between year to year to maintain
each 6 base years like 2004 to 2009 and 2010 to 2015. Now we are going to describe about
the data from January 2004 to January 2009, we got the number of management companies
2

were 37 and 39 accordingly. We found the number of approved funds was increased from 243
to 550 respectively. In 2004, unit in circulation was 99.651 billion, whereas 241.384 billion
was in 2009 and the number of accounts was improved from 10,303,586 to 13,075,655. The
total NAV of the fund in 2004 was rm72. The total NAV on, the fund rm136.614 billion was
in 2009 and most importantly, the capitalization was 10.96% shifted to 20.46% in 2004 &
2009 consequently. If we discuss about the data from February 2010 to February 2015, there
were some fluctuations in the number of management companies, which was from 39 to 36.
Although management companies were decreased from 2010 to by 2015, the number of
approved funds was increased from 572 to 629 where conventional unit trust jumped from
417 to 440 and Islamic unit trust was shifted from 155 to 189. Now, we would like to
highlight the launched funds from approved funds, it was 553 in the year of 2010 whereas in
2015, it was 613. In launching funds, there was 403 of conventional and 150 of Islamic unit
trust fund in 2010 while in 2015 there was 427 of conventional and 186 of Islamic unit trust
fund. If we see unit in circulation, there was 438.378 billion units in 2015 where 342.550 was
in conventional and 95.828 was in Islamic based compared to the data of February 2010,
there was 280.880 billion units where 223.293 was in conventional and only 57.587 was in
Islamic unit trust fund. Now we would like to talk about no. of account of unit trust fund, it
was almost 14,206,151 where conventional was 12,412,129 and Islamic based was 1,794,022
in the February of 2010 compared to data of 2015, it was almost 17,506,913 whereas
conventional was 15,089,764 and Islamic based was 2,417,149. Total NAV was RM363.300
billion where convention was 314.715 and Islamic was 48.585 billion and NAV to Bursa
Malaysia Market Capitalism was 20.96% in 2015. But in 2010, total NAV was RM198.217
billion where convention was 175.767 and Islamic based was 22.450 and NAV to Bursa
Malaysia Capitalism was 19.52% ( Yosof, 2007 ).
This paper aims to evaluate the overall perception of investors to Islamic and
conventional unit trust funds in the context of Malaysia with the measurement challenges, in
case of investment in a unit trust fund. This paper is organized as steps follow: i) begins with
literature review that provides a brief review of prior studies relevant. ii) Outlines the
methodology and measurement employed in this study. iii) Discusses the findings from the
empirical analysis. Section D concludes with the implication and suggestion.

1.2 Problem Statement

Unit trust in Malaysia shows its growth consistently both in terms of size as well as
the number of fund categories. Some researchers have done studies related to the unit trust,
for instance, Abdullah, Hassan &Mohamad (2007) studied on the performance of Islamic unit
trust. In the same year, Taib and Isa also conducted a research on unit trust with focused on
aggregate funds performance. In 2010, Saad did a comparative study on the performance of
Islamic and Conventional unit trust, while Hafizz found out the significance of Islamic and
conventional unit trust. Recently, Baharun, Hasim and Sulong (2013) studied on unit trusts
customer satisfaction. Fasha (2013) compared the performance between conventional and
Islamic unit trust performance. In addition, Norman (2013) analyzed the performance of unit
trust during a crisis. All those mentioned researches mostly conducted on the performance
side of unit trust itself. The mentioned researcher mostly measured the practical side of unit
trust. There is no research, conducting on the sensitivity of costumers perception on unit
trust. Hence, there is still a gap in the research related to unit trust. Therefore, this research
aims at fulfilling the gap.

1.3 Research Objectives

Unit trust in Malaysia plays an important role in its economy as its NAV of Mutual
Funds invested on March 2015 was at RM 362.58 billion. This study will focus on the
investigation of current issues in Islamic unit trust. In line with this, there are three specific
objectives have been developed in this paper. These objectives of this study are:
1. To estimate the sensitivity of customers towards Islamic and conventional unit trust
investment.
2. To investigate the market performance of Islamic and conventional unit trust.
3. To evaluate the important factors influencing demand for Islamic and conventional unit
trust fund.
1.4 Research Questions
To achieve the objective of this study, the following research questions have been
developed:

Are the investors compassionate towards Islamic and conventional unit trust

investment?
Does the market performance of Islamic and conventional unit trust funds?

Are there factors influencing investors to invest towards of Islamic and

conventional unit trust fund?

1.5 Significance of the Study

The unit trust fund has become one of the important investment schemes for the
development of the worlds economy. It has been contributed to growing up Malaysians
financial conditions. Malaysian people are now being more progressive and stable in case of
financial conditions. Although, we certainly cant say that all Malaysian people are
financially stable. Lunching unit trust investment mechanism, Malaysian government
confirms their efforts to increase the living situations of the lower income people, with the
minimizing cost and risk. The unit trust product is the important component to mobilize the
saving fund to the investment of the government development work in the Malaysian
economy. All investors perception is to earn a good return from their investment. This Study
on the factors influencing the intention to invest in unit trust fund and the investor investment
decisions will help the industry formulate business strategies to stimulate financial growth of
this industry, and eventually it helps in the healthy lung run growth of the countrys economy.

CHAPTER 2
LITERATURE REVIEW
2.1 Previous Studies
Saadet al. (2010) found that on average, the Islamic funds failed to outperform the
performance of conventional fund. However, the Islamic funds seemed to have lower risks
than the conventional funds. The performance of both funds was analyzed over a period of 36
months commencing from February 2000 to January 2003 and evaluated based on the
standard performance measures for funds known as Adjusted Sharpe, Trey nor and Adjusted
Jensen Alpha Indices. The composite index of the Kuala Lumpur Stock Exchange (KLSE)
represented the market benchmark for the conventional funds while the Islamic funds used
Syariah index as proxy for the market. Rasiet al. examined that Islamic unit trusts produce
lower returns than the market portfolio.
The performance of Islamic unit trust with Conventional unit trust is towards FTSE
Bursa Malaysia KLCI (KLCI) to know whether the funds outperform KLCI. The trey nor
Index relates the excess return over the risk-free rate to the additional risk taken, where the
higher the ratio indicates the better the performance of the portfolio under analysis. Jensen
Alpha is used to determine the abnormal return of a security or portfolio of securities over the
theoretical expected return. The Islamic unit trusts funds studied were ranked based on
average return, standard deviation, coefficient of variation and beta (systematic risk).
Azrul Hafizz (2010) found that the differences between Islamic funds and
conventional funds are not significant based on t-tests and the locations of both type of funds
according to Mann-Whitney tests in performance between Islamic and conventional funds in
the context of Malaysian capital market. The use of either KLCI Index or EMAS as a market
benchmark does not influence the result. This study uses 94 funds as the sample, which is
made up of 44 Islamic funds and 50 conventional funds. To achieve the major objectives of
this paper, Sharpe ratio, Trey nor index and Jensen alpha are used to evaluate the mutual
funds performance.
According to Kassim and Kamil (2012) during the non-crisis period, the performance
of the Islamic unit trusts is comparable to that of the market benchmark, while during the
crisis period, the Islamic unit trusts perform better compared to the non-crisis period. The
adjusted Sharpe index, adjusted Jensen Alpha index, and Trey nor index is adopted to
compare the performance of the Islamic unit trusts against the market benchmark and risk6

free return. In measuring risk and diversification, the study relies on the standard deviation
and R coefficient of determination, respectively. Norman et al. (2013) examined that
conventional unit trust funds perform better during non-crisis and after the crisis period while
shariah-based unit trust funds have better performance during financial crisis period.
Conventional funds also have a higher standard deviation than shariah-based funds
which implied that conventional funds are more risky than shariah-based funds. The result
also found that risk, return profile is related to the return performance of funds. This study
focuses on seven conventional equity funds and seven hariah-based equity funds of Public
Mutual Berhad. The data are computed for ten year period from January 2003 to December
2012 and divided into three sub-periods which are before the financial crisis, during the
financial crisis and after financial crisis. Benchmarks used in this study are FTSE Bursa
Malaysia KLCI (FBM KLCI) for conventional funds, FTSE Bursa Malaysia EMAS Shariah
Index (FBMS) for shariah-based funds and three-month Treasury-bill as risk-free rate
benchmark. Three standard methods of Sharpe index, Trey nor index and Jensen index are
used in this study to evaluate the performance of unit trust funds (Muhammad, 2010).
Abdullah et al. (2007) found that Islamic funds performed well than the conventional
funds during bearish economic trends while, conventional funds showed better performance
than Islamic funds during bullish economic conditions. In addition to that finding, both
conventional and Islamic funds were unable to achieve at least 50 per cent market
diversification levels, though conventional funds are found to have a marginally better
diversification level than the Islamic funds.
According to Sandha (2013) examined that the performance of both funds Islamic
and conventional unit trust both was well. The performance was evaluated based on standard
performance measures known as Adjusted Sharpe Indices. As to conduct the study, the
collected data were from January 2002 to December 2012 by using quarterly basis which
retrieve from secondary data of Islamic and Conventional Unit Trust funds. Bashir and
Nawang (2011) pertaining to the return for both conventional and Islamic funds and the
market indices, it is found that conventional funds outperform the market and on the
contrary, Islamic funds underperform the market. It is also found that fund managers
have poor timing ability and they are unable to correctly identify good bargain stocks
and to forecast price movements of the general market. Their main objective was to
evaluate the overall performance of Islamic and conventional unit trust funds in the context of
Malaysias capital market, in terms of risk, return and diversification of selected unit trust in

Malaysia for the 5-year period from 2002 to 2006. They applied the most popular
measures of performance such as Sharpe index, Trey nor index, and Jensen index.
According to Choong et al. (2012) the development and the performance trends of
unit trust investment schemes in Malaysia both conventional as well as Islamic unit trust
schemes (UTSs). The rapid growth of the investment management industry over the last 10
years was largely driven by the unit trust industry, in which the net asset value (NAV) grew
annually by 18.0% from RM43.3 billion in 2000 to RM226.8 billion in 2010. The penetration
rate of the unit trust industry rose from 10.0% in 2000 to 17.8% in 2010.
2.2 Formulated Hypotheses
The hypotheses of this research as the followings:
1. There is no significant perceptual difference between Islamic and conventional unit
trust in Malaysia.
2. There is no significant difference in investing to unit trust fund selection criteria as
perceived by the investor.

CHAPTER 3
RESEARCH METHODOLOGY
We collected data from primary sources by conducting surveys among80 respondents,
but some data were missing and we finally adapted 78 data to estimate the result. Our
respondents were Malaysian citizens who are somehow informed about the unit trust fund
operation if different forms. We also collected data from secondary sources like the FTSE
Bursa Malaysia EMAS Shariah Index and FTSE Bursa Malaysia KLCI (KLCI).This
research compares the customer perception on conventional and Islamic unit trust fund after
that we try to identify the relevant factors which associated with unit trust fund management.
3.1 Instrument
This research paper reports part of a larger study on investment in a unit trust fund in
Malaysia. To measure the performance of unit trust fund we used Sharpes,Treynors, and
Jensen index and to know about customer perception about unit trust a primary data survey
had conducted. In the survey form , Section A talked about our respondent demographic
profile. In section B, all questions are about investor perception of that particular
product.Consequently, section C and D, by focusing on investment in Islamic and
conventional unit trust and the respondent ware asked to indicate on a five pointLikert type
scale that range from Strongly disagree to Strongly agree. We have conducted several
tests, namely, regression analysis, repeated measure ANOVA, correlation and so on.
3.2 Sampling and Data collection
This research used primary data that were collected by accompanying surveys in
different cultural people. The target respondents in the research were an employer,
employee,academics and professionals who are concerned about the unit trust investment.
The main reason for choosing them as the sample was because the respondents contributed
their income to the unit trust fund. We have given the effort to provide the latest update of the
unit trust industry, the study considers the data from April 2010 to March 2015. We have
collected data from secondary market like the FTSE Bursa Malaysia EMAS Shariah Index
and FTSE Bursa Malaysia KLCI (KLCI).

3.3 Statistical Analysis

Primary data involved to carry out the analysis of funds, according to designed
variables. For the Islamic and conventional unit trust, regression, repeated measures one way
ANOVA test and correlation test did to measure the degree of perception of the customer
about unit trust in Malaysia. Designed Hypothesis testing of fund characteristics was mainly
carried out using two-tail ANOVA test for differences in the means. Other than that, we
collect secondary data from Bloomberg to measure performance of conventional and Islamic
unit trust by using Sharpes,Treynors, and Jensen index.
3.4 Measurement of performance
Income and capital gain measures the return of unit trust funds. The calculation for
unit trust fund as follows:
p ,t=

NAV t NAV t1 + Dt
NAV t1
R

In the above equation, RI, indicates the rate of return of the unit trust (i) at the time of
t, NAVt refer to net asset value at time t,, NAVt-1consider as net asset value single period
before time t, D refers dividend/cash disbursement at time t.
In this paper, three standard methods, namely the Sharpe's index, Treynor's index, and
Jensen's Alpha index are employed to evaluate the performance of Islamic unit trust funds.
3.4.1

Sharpe and Adjusted Sharpe Performance Model

The Sharpe's index is calculated by subtracting the risk-free rate from the rate of

return for a portfolio and dividing the result by the standard deviation of the portfolio returns,
which can be calculated as follows:

Sharpe Index = (Portfolio Return Risk-Free Returns) / Std Deviation

SI =

10

KrKf
p

Contrary, Sharpe index was found to have some biases and Jobson and Korkie (1981) have
modified the Sharpe index to the adjusted Sharpe's index. Therefore, this study adopts the
Adjusted Sharpe Index which is formulated as followed:
Where, ASi is adjusted Sharpe measure for fund i, Si is Sharpe Index measure for fund i, and
N is the number of observations.

ASI =

Si x N
N +0.75

3.4.2

Treynor Performance Model

Treynor (1965) developed the first measured on portfolio performance that included

risk. The Treynor Index focuses on the portfolio's undiversifiable risk known as the
systematic risk and measured by beta. The Treynor measure can be explained by
Treynor Index

TI =

= (Portfolio Return Risk Free Return) / Beta

RI RFR

Where, Ti is Treynor measure to fund I, RI is the average return for a fund i, RFRis average
return on a risk free investment, and i is the systematic risk or beta for fund i.
3.4.3

Jensen and Adjusted Jensen Performance Model

The Jensen Index or alpha was developed by Jensen (1968) based on the capital asset

pricing model (CAPM). Alpha is used to determine by how much the realized return of the
portfolio varies from the required return, as determined by CAPM, which can be expressed as
follows:
JI= (Rj - Rf) j (Rm Rf)
Where Rp is the realised return of portfolio, Rmis the market return, and the Rf is th e riskfree rate.
Again, this measurement was modified by Jobson and Korkie (1984) due to biasness and was
named the Adjusted Jensen Index which is also applied in this study:
11

AJI =

JI

Where, i is alpha or the Jensen measure for fund i, and i is the systematic risk or beta for
fund.
3.4.4

Measurement of Risk and Diversification Model

The formula of measurement of risk and diversification model would be as

followings:
= ( (Ri,t Ri)2/ (N 1))1/2
= COV(RiRm)/ VarRm
3.5 Summary of Performance Model Measurement
The summary of performance model measurement using the above mentioned tools
would be as followings:
Table 3.5
Summary of Performance Model Measurement
Measurement
Return

Formula
p ,t=

NAV t NAV t1 + Dt
NAV t1
R

Symbolization

Rp,t is rate of return of

the unit trust p for the

month of t
NAV t is net asset value

for the month t

NAVt-1is net asset
value one period before

for the month t

Dt is indicates dividend
at time t

Sharpe Index

SI =

KpKf
p

Kr = average monthly return

of portfolio p over the

evaluation period
Kf= average monthly riskfree rate of return, the return

12

of government bonds with

the same duration under

study.
= standard deviation of
the portfolios returns

Adjusted Sharp Index

ASI =

Si x N
N +0.75

Si is Sharpe Index measure

for fund i
N is the number of
observations

Jensen Index

JI= (Rj - Rf) j (Rm Rf)

JI = intercept of Capital
Asset Pricing Model after
allowing for risk free rate of

return
Rm = average return on the
market index for the period

under study
Rj= is the realized return
of portfolio

j = systematic risk of
portfolio j

Adjusted Jensen Index

Treynor Index

AJI =

TI =

JI

RI RFR
j

j = systematic risk of
portfolio j

RI = the average return of

portfolio j over the

evaluation period
RRF= average risk free
interest rate of a government
bond with the same duration

under the study

j = a measure of the
sensitivity / volatility of a
portfolio js return compared

13

to the market index.

Standard

= ( (Ri,t Ri)2/ (N 1))1/2

Deviation

Beta

= COV(RiRm)/ VarRm

Ri,t = is rate of return of the I

unit trust at time t

Ri= is average return for

fund i Nis number of

observations

= is systematic risk or beta

for fund i
Cov (Ri, Rm ) is covariance
between fund returns Riand

market returns RM
Var (RM) is a variation of
market returns RM

3.6 Theoretical Framework of the Research

This research is a quantitative research that aims to explore the preference of
Malaysian in choosing whether Islamic or conventional unit trust. By getting the date of the
comparison between Islamic and conventional unit trust in Malaysia from the previous
research, then we would like to conduct the questionnaire to the sample of our research. Our
population would be Malaysian citizens. We also would determine the factors that influence
the preference of choosing Islamic or conventional unit trust.
Independent Variable

Dependent Variable

Conventional Unit Trust

Unit Trust

Investor perception = Performance

Islamic Unit Trust

3.7 Demand of Unit Trust

Unit trust is a growing investment that can be alternative for people to invest and gain
income. As a growing investment sector, people still not aware of unit trust and hence the
14

demand of unit trust is not as that high compared to other investment sectors. However, unit
trust shows its consistency to keep growing, for instance, in Malaysia the total percentage of
net asset value (NAV) of unit trust in February 2015 contributes almost 21% to Bursa
Malaysia market capitalization (Securities Commission, 2015).
3.8 Impact of Unit Trust
Unit trust is a durable investment to the crisis. For instance, according to Kasim and
Kamil (2012) found that Islamic unit trust performed better than the market during a down
market, while in a non-crisis period, the performance of the Islamic unit trusts are comparable
to that of the market.In addition, they stated that the changing beta value of the Islamic unit
trusts over the various sample periods suggests that the Islamic unit trusts are sensitive to the
changes in the market, particularly during the up-market, but relatively less sensitive in the
down market period. Consistently throughout the analysis, the Islamic unit trusts are shown
to be well-managed as they are shown to have a commendable diversification level in all subperiods.
Based on the above statement, unit trust would give a better impact to the economy as
well as the investor since it performed well during crisis.
3.9 Advance in Technology
Technology eases everything, including unit trust investment. There are some benefits
from the advance of technology for a unit trust. For example, nowadays invest in unit trust
can be done personally from home without should come to the bank. There are many online
products of unit trusts, such as HSBC Singapore unit trust product and many others.
Additionally, the advance of technology also could ease to get the information about unit trust
for all participants.

15

CHAPTER 4
ANALYSIS AND DISCUSSION
The objective of this section to analyze the performance of the Islamic and convention
unit trusts from April 2010 to March 2015, the study compares the performance between
Islamic and conventional unit trusts, and the customer perception to invest in this product.
4.1 Primary Data Analysis
Below are the tables as the evidence of primary data analysis:
Table 4.1
Primary Data Analysis to Estimate the Investor Perception toward Islamic and
Conventional Unit Trust
Factors

N
74

Mean

t.
-11.639

-1.307

Std.

Std. Error

Deviation

Mean

.972

P-Value
.000

.112

-10.069

-1.213

1.044

.120

-10.485

-1.093

.903

.104

-2.767

-.400

1.252

.145

-4.795

-.533

.963

.111

-4.102

-.547

1.154

.133

-7.355

-.907

1.068

.123

-6.736

-.747

.960

.111

If we see the overall performance mentioned above, the significance of Islamic unit
trust is higher than a conventional unit trust fund. So, the public perception should go to that
side based on their high return. Focusing the significance is the way to make a decision to
invest. Therefore, Islamic unit trust is more productive compared to conventional unit trust.

Table 4.2
Selection Criteria as Perceived by the Investor to the Unit Trust Fund
16

Mean

Conventional

Islamic

Std.
Deviation

Std.
Error
Mean

Correlatio
n

Sig.

3.47

75

0.905

0.105

-0.057

0.624

3.33

75

0.875

0.101

0.111

0.341

3.43

75

0.903

0.104

-0.109

0.353

3.33

75

0.991

0.114

0.049

0.675

3.52

75

0.777

0.09

-0.002

0.989

3.57

75

0.825

0.095

0.119

0.309

3.6

75

0.822

0.095

0.032

0.788

3.44

75

1.043

0.12

-0.027

0.815

3.23

75

0.981

0.113

0.046

0.697

3.73

75

0.759

0.088

0.094

0.421

3.6

75

0.822

0.095

0.012

0.92

3.87

75

0.859

0.099

0.023

0.847

4.373

75

4.7385

0.5472

-0.182

0.117

3.95

75

0.751

0.087

-0.068

0.565

3.76

75

0.898

0.104

-0.2

0.086

3.87

75

0.844

0.097

0.158

0.176

3.89

75

0.815

0.094

0.055

0.639

3.91

75

0.738

0.085

-0.053

0.651

3.65

75

0.862

0.1

-0.153

0.189

3.87

75

0.794

0.092

-0.062

0.598

3.87

75

0.704

0.081

-0.016

0.889

4.2 Performance Measurement

Table 4.2.1, 4.2.2 and 4.2.3 below show the summary of Sharpes Index, Treynors
Index, and Jensens index. The measured performance of Conventional and Islamic unit trust
17

funds is measured by portfolio performance measurement consists of Sharpe, Treynor, and

Jensen method.
Table 4.2.1
Average Return on Unit Trust Investments
Index

Total Return
70.01 %
38.64 %
40.94 %

FBMS Index
FBMKLCI Index
FBM 100 Index

Differences
7.20%
1.92%

The performance of the Islamic unit trusts during our research period is shown the
highest compared to conventional unit trust even the top 100 combined unit trusts in
Malaysia, which is 70.01%. However, in the conventional unit trust, there is shown only
38.64% return which is almost half of the return of Islamic unit trust. Moreover, there is a
shock if we focus on the result of best 100 combined unit trust fund with 40.94% return,
which is just above of the return of conventional unit trust. Therefore, based on the overall
performance of unit trust fund, I can assure that Islamic unit trust will be the best choice for
investors in future to invest for high return compared to others. Finally, it can be
recommended that if the Malaysian government takes care of Islamic unit trust fund, it will
be grown to be the most popular.
Table 4.2.2
Conventional Unit Trust Fund Performance Measured by Sharpes, Treynors, and
Jensens Index.
Conventional

Sharpes

Sharpes

Treynors

Jensens

Jensens

Unit Trust

Index

Adjusted

Index

Index

Adjusted

FBMKLCI Index

.1129

.1115

.5273

.3656

.3339

SD

3.15

3.15

3.15

3.15

3.15

Note: FTSE Bursa Malaysia KLCI

Based on the measurement for Conventional unit trust funds, the ranking of Treynor
Index shows the highest return that was .5273. On the other hand, FBMKLCI Index result
indicates the lowest ranking for the Sharpe index that is .1129.
Table 4.2.3
18

Islamic Unit Trust Fund Performance Measured by Sharpes, Treynors, and Jensens
Index.
Islamic Unit

Sharpes

Sharpes

Treynors

Jensens

Jensens

Trust

Index

Adjusted

Index

Index

Adjusted

FBMS index

.2042

0.2016

.63714

.6263

.6904

SD

4.64

4.64

4.64

4.64

4.64

Note: FBMS is FTSE Bursa Malaysia EMAS Shariah Index.

From the above table, the result for Islamic unit trust funds shows that the overall
performance indicates all funds are performing very well. As we seen in the table, the highest
return of FBMS index by Treynors that was .6371. On the contrary, the lowest return is .
2041 that is shown by the Sharpe index.
The synopsis of the fund performance measurement for both Conventional and
Islamic unit trust funds using Sharpe, Jemsen and Treynor index shows all had the positive
result. Overall performance for Sharpe and Treynor Index for both unit trust funds indicates
good market performance. Finally, the funds are having a profitable return and it indicates to
take a good decision making for the investors to get a profitale investment. Besides, it can be
said that Islamic unit trust are performing better than conventional unit trust in the market.
4.3 Implication
The findings of the paper lead important concrete implications to the unit trust
investors along with unit trust players. The finding of this study associated the investors and
players to set strategies their portfolio during the changes in the economic conditions. The
results of this study recommends that the Islamic unit trust fund yet to be an effective hedging
tool during weak market and deliver impressive portfolio divergence facilities for the
investors. Through the findings of this study, investors able to employ strategies and diversify
their range consequently in the period of different market conditions.
The results of this paper, recommend that the Islamic unit trusts industry should be upgraded
widely with more opportunities such as products range spreading, broadening of investing
opportunities, flexibilities and expulsions. The central banks, Shariah board or other
regulatory authorities should reinforce the Islamic unit trust funds as it provides possibilities
for diversification for the investors and also advancing market efficiency.

19

CHAPTER 5
CONCLUSION AND RECOMMENDATION
5.1 Conclusion
The primary focus of this study is to determine the comparative performance of
Islamic and conventional unit trust fund across the Malaysian economic condition in last five
years. The results show that the performances of the unit trusts funds are slightly below than
that of the market. A comparative measure of variability designates that Islamic unit trust
funds are less uncertain than conventional funds. Both unit trust funds found poor selection
and market timing abilities.
Our findings refers that Islamic unit trust funds accomplish better than conventional
unit trust funds for the last five years, which a positive sign for the growth of Islamic unit
trust fund industry. Therefore, Islamic unit trust funds can be used as hedging tools during
any financial breakdown economic collapse. The Islamic unit trusts are found to be glowing
accomplished as they are exposed to have a creditable expansive level in aspects of economic
conditions. The results proved that the Islamic unit trusts are able to outstrip the market
during the critical situation.
5.2 Recommendation
This study recommended that the Islamic unit trust funds able to become a feasible
substitute to the conventional investment opportunities predominantly throughout market
uncertainties.

20

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