ASN 3, ASW 2020, ASM are they worth buying?

The funds under PNB (permodalan nasional bhd) have always cast a cloud of mystery on my minds. Despite having invested in it for more than 10 years, i still not sure about its feature. Yesterday i read an artical in The Edge which covers PNB and it has clear up many of my doubts. Here i share what i think is useful enough for every layman investor like me.

Recently PNB are selling more units for ASW 2020 and ASM to the general public. As always, this created a buying spree for many people. I have heard people started queing at the banks and post office as early as 7am. This is a good sign, at least it shows the Malaysians are still cash strong enough to save and invest.

Both ASM and ASW2020 are a hybrid of a savings account and unit trust. To be exact they are fixed price fund. The 'NAV' are always fixed at RM1. Every year, the investor will receive dividend from the fund, which is at around 7-8%. PNB also have variable priced funds such as ASN3, which is essentially a balanced fund. ASM, ASW2020 and ASN 3 are open for investment by all Malaysians while other funds under the PNB stabe are only open for Bumi'.

Here are the return of the funds for the past few years

source: The Edge, May 4-10 2009

note that the variable priced funds are identical with private sector unit trust funds, wheareas the fixed price funds are the uncommon ones. They are not capital guranteed fund because even capital gurantee fund can lose money if the investor go for early redemption. As opposed, investor can withdraw their investment anytime for the fixed price fund.

This make the funds are pretty good investment vehicle to most people who do not know how else to invest their $. With a rather respectable 'safe' return of about 7% annually, it is like a super savings account : you get a higher return than just savings in a typical savings account.

however, for the more 'adventurous' investors, there are actually many more choices around: but of course they comes with risk and needs certain level of skill.

For me, thanks to the long que needed to buy these units, i opt out from buying it and invest with other stuff. For example, i can 'save' in SSPN for my daughter and it gives a respectable return of at least 12% for your first RM3k. Why i say 12%? this is because every year up to RM3k invested to SSPN are eligible for tax deduction. SSPN currently has a return of around 4.5% and let say i have a tax bracket of 8% (which most ppl exceeding this), my return will be 12.5% :)

Also, given current still slightly depressed stock market, there are plenty of stocks that still offer dividend yield of more than 7%, which at least match those offered by the PNB funds. To cite one example, NTPM.

another thing that bother me at times are that the fixed priced funds of PNB are not trasparent. Once, utusan konsumer critize PNB for using the ppl money to earn money from ppl. for example, PNB virtually controls Maybank, while Maybank is selling ASB. Maybank actually persuades the investor to borrow $ from the bank to buy ASB (those days ASB still have return in the 12%++ range), citing that they can earn the arbitrage between the higheer return of the ASB and the lower loan interest rate. It turns out that eventually ASB not manage to maintain their high dividend, causing many people to run into debt. They are forced to sell their ASB to service the loan. ... a bad cycle ensues.

so, it is really up to investor to see what they want. Although not perfect, PNB are still managed 'professionally' by 74 certified fund managers and i believe they are doing legitimate business. Unlike EPF, they are also not 'corned' by politician to make stupid bailout of failed infrastructure projects (the LRT) or business (MAS).