The performance of Islamic and conventional unit trust in Malaysia / Nurul Ashikin Balian

In this paper an attempt is made to evaluate the performance of Islamic and Conventional unit trust fund in Malaysia. Unit trust fund in Malaysia is an investment vehicle created by asset management companies specializing in pooling savings from both retail and institutional investors. Individual investors seeking liquidity, portfolio diversification and investment expertise are increasingly analyzes the performance of Islamic and conventional unit trust in Malaysia. Therefore, this paper investigates the unit trust potential in Malaysia by examining the performance of such funds by focusing on more aggressive equity types of fund by analyzing their risk and return. This is done by measuring the performance of unit trust, which is Net Asset Value (NAV) of ten unit trust funds and the prices on market portfolio or Kuala Lumpur Composite Index (KLCI). Based on the ten unit trust under studied over the monthly period of 2001 until 2010 using the method used by Sharpe, Treynor and Jensen, the researchers are able to formulate explicit measures of a portfolio’s performance on the dimensions of risk and return. The results had shown that, return for Conventional unit trust is higher than Islamic unit trust. Then, in term of risk, the study found Islamic unit trust is more risky compared to Conventional unit trust. At the same time, Conventional unit trust is better than Islamic unit trust when the measurement of Sharpe Index, Treynor Index, and Jensen Alpha Index were used and analysed.