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Assessing Performance of Unit Trust Waqf Funds in Malaysia

AHMAD FAWWAZ MOHD NASARUDDIN

AZNIZA HARTINI AZRAI AZAIMI AMBROSE (PRESENTER)

AINI AFIFAH MOHD SAFEE

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PRESENTATION OUTLINE

  1. Introduction
  2. Problem statement
  3. Literature review:
    • The concepts
    • Unit trust waqf featured funds (UTWF) in Malaysia
    • Gaps
  4. Data and methodology
  5. Findings
  6. Conclusion

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INTRODUCTION

  • Waqf featured funds “facilitates the offering of Islamic unit trusts and Islamic wholesale funds with a specific aim to channel a whole or a portion of income generated for waqf purposes” (Securities Commission Malaysia, 2023)
  • Presently, there are five UTWF in Malaysia namely Makmur myWakaf, PMB-An-Nur Waqf Income Fund, Kenanga Waqf Al-Ihsan Fund, Maybank Mixed Assets-I Waqf Fund, and BSN Dana Wakaf Al-Ikhlas
  • The primary objective of UTWF is to generate investment returns while directing a portion of those returns towards charitable causes, such as healthcare, education, and community empowerment
  • The initiations of UTWF align with the Securities Commission Islamic Fund and Wealth Management Blueprint 2017, which emphasize the development of waqf funds

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PROBLEM STATEMENT

  • However, the introduction of Unit Trust Waqf Featured Funds (UTWF) in Malaysia has not received substantial participation compared to other retail funds, resulting in relatively low Asset Under Management (AUM).
  • Bank Negara Malaysia intends to employ social finance for the mobilization of social goods and services (Bank Negara Malaysia, 2023)

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RESEARCH OBJECTIVES

  • Given the importance of supporting cash waqf through fund management institutions, it is crucial to evaluate the performance and sustainability of UTWF.
  • Compare the performance of UTWF in Malaysia and,
  • Identify the top consistent unit trust waqf fund based on its performance.

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LITERATURE REVIEW – The concepts

Waqf featured funds

Cash waqf

Temporary waqf

  • First practiced during Daulah Uthmaniyah on the grounds of istihsān bi al ‘urf (Mauluddin & Rahman, 2018)
  • Although the prevalent opinion in the Shafi’e madhab disallows cash waqf (Ambrose & Asuhaimi, 2021), other authoritative legal institution allows it

The permissibility for temporary waqf coincides nicely with the option for investors to liquidate the UTWF without needing to continuously provide benefits to the mawquf ‘alaih (waqf recipients or beneficiaries)

Although cash may be given as waqf temporarily (and in itself is temporary), the waqf must not be revoked within a stipulated period that must be agreed early on (Ambrose & Asuhaimi, 2021)

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LITERATURE REVIEW – UTWF in Malaysia

Fund Name

Makmur myWakaf Fund

PMB-An-Nur Waqf Income Fund

Kenanga Waqf Al-Ihsan Fund

Maybank Mixed Assets-I Waqf Fund

BSN Dana Wakaf Al-Ikhlas

Fund Manager

BIMB Investment Management Berhad

PMB Investment Berhad

Kenanga Investors Berhad

Maybank Asset Management Sdn Bhd.

Permodalan BSN Berhad

Fund Category (Mainly which Assets)

Mixed Assets (Shariah)

Mixed Assets (Shariah)

Mixed Assets (Shariah)

Mixed Assets (Shariah)

Mixed Assets (Shariah)

Date of launch

2021

2021

2021

2021

2022

Fund Type (Portfolio Emphasis - (Growth vs value))

Income

Income and growth

Income and growth

Income and growth

Income and growth

Table 1: Details of UTWF in Malaysia

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LITERATURE REVIEW - Gaps

  • Not many academic studies have been conducted along the lines of waqf featured funds until circa 2018 (such as Sulaiman and Hasan (2017), Ambrose, Aslam and Hanafi (2018), Khaliq, Hussin and Mohammad (2019), and Sulaiman and Hasan (2020)); most were on I-REITs linked waqf
  • The notion of a temporary mawquf is still out of favor as oppose to permanent mawquf; could be due to the fact that the Shafi’e madhab do not recognize temporary waqf (Ambrose and Peredaryenko, 2022)
  • According to the Lipper database and Securities Commission Malaysia (2022), the AUM for Unit Trust Waqf Funds stands at only RM46.63 million as of end 2022, representing a mere 0.02% of the Total Shari’ah AUM of RM205.9 billion

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DATA

  • Type of data: Average return of the mentioned five UTWF
  • Frequency of data: Monthly
  • Period of data: April 2021 – June 2023
  • Collection of data: Refinitiv database

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METHODOLOGY

  • By adopting this approach, the selection process is focused on the fund with the highest maximum probability of outperforming the risk-free return

 

 

The higher Treynor ratio would indicate a better performing fund (in comparison to systematic risk/overall UTWF market)

 

The higher Sharpe Ratio would indicate a better performing fund (in comparison to unsystematic risk/ )

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RESULT

Fund Name

Sharpe Ratio

Rank

Modified Sharpe Ratio

Rank

Treynor Ratio

Rank

BSN Dana Wakaf Al-Ikhlas

-1.8774

5

0.0302

5

-4.1426

5

Kenanga Waqf Al-Ihsan

-1.4844

4

0.0688

4

-2.7988

4

Maybank Mixed Assets-I Waqf

-2.1089

6

0.0175

6

-4.3180

6

Makmur myWakaf MYR

-1.1352

3

0.1282

3

-2.2748

3

PMB-An-Nur Waqf

-0.3358

1

0.3688

1

-1.1279

2

*KLCI Emas Shariah index

-0.8033

2

0.2109

2

-0.0269

1

Table 2: April 2021 – June 2023

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RESULT

Fund Name

Sharpe Ratio

Rank

Modified Sharpe Ratio

Rank

Treynor Ratio

Rank

BSN Dana Wakaf Al-Ikhlas

 

 

 

 

 

 

Kenanga Waqf Al-Ihsan

-1.1015

2

0.1353

2

-1.7228

4

Maybank Mixed Assets-I Waqf

-2.5507

4

0.0054

4

-3.9139

5

Makmur myWakaf

-1.2641

3

0.1031

3

-1.7063

3

PMB-An-Nur Waqf

-0.5317

1

0.2975

1

-0.9689

2

*KLCI Emas Shariah index

-2.7114

5

0.0034

5

-0.0282

1

Table 4: January 2022 – December 2022

Fund Name

Sharpe Ratio

Rank

Modified Sharpe Ratio

Rank

Treynor Ratio

Rank

BSN Dana Wakaf Al-Ikhlas

-1.9269

6

0.0270

6

-4.1059

6

Kenanga Waqf Al-Ihsan

-1.3760

4

0.0844

4

-2.9752

3

Maybank Mixed Assets-I Waqf

-1.6460

5

0.0499

5

-4.0267

5

Makmur myWakaf

-0.9392

2

0.1738

2

-2.0506

2

PMB-An-Nur Waqf

-1.0213

3

0.1536

3

-3.1843

4

*KLCI Emas Shariah index

-0.6726

1

0.2506

1

-0.0277

1

Table 3: April 2021 – December 2021

Fund Name

Sharpe Ratio

Rank

Modified Sharpe Ratio

Rank

Treynor Ratio

Rank

BSN Dana Wakaf Al-Ikhlas

-2.2954

5

0.0109

5

-4.7403

5

Kenanga Waqf Al-Ihsan

-0.1599

2

0.4365

2

-0.2958

3

Maybank Mixed Assets-I Waqf

-3.6815

6

0.0001

6

-7.1869

6

Makmur myWakaf

-1.7171

4

0.0430

4

-4.5741

4

PMB-An-Nur Waqf

0.1500

1

0.4401

1

0.4456

1

*KLCI Emas Shariah index

-0.6208

3

0.2674

3

-0.0223

2

Table 5: January 2023 – June 2023

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CONCLUSION

  • For a rational profit seeking investor, the PMB An-Nur Waqf fund or the Makmur myWakaf fund should be the choice for investment.
  • Limitations of study:
    • low frequency of data and rudimentary method
    • scope only on financial return
  • Suggestions for further research:
    • consider daily frequency and other sophisticated methods of analysis to provide further insight on the performance of UTWF
    • study the social return (or the extent of social impact) so that investors can deliberate between financial return and social return

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