Should You Invest in PNB Structured Investment Fund?

Permodalan Nasional Bhd (PNB) just launched a new Structured Investment Fund (SIF). This RM3 billion closed-end fund will invest in structured products and a property trust that owns PNB buildings.

Some people may not know who are PNB. But I am sure you have heard of Amanah Saham Nasional (ASN). PNB is currently managing RM76 billion worth of funds from 8.8 million unitholders of ASN, ASW, ASG, etc.

What’s a structured investment fund?

A structured investment product is generally a pre-packaged investment strategy which is based on derivatives (ie. options etc) but which features protection of principal if held to maturity.

For example, an investor invests 10,000 ringgits, the issuer simply invests in a risk free bond which has sufficient interest to grow to RM10,000 after the 5 year period. For example, this bond might cost RM8,000 today and after 5 years it will grow to RM10,000. With the leftover funds the issuer invest in special derivatives needed to perform whatever the investment strategy is.

The two common elements in a Structured Product are:

1. A bond product or another element of capital safeguard.

2. An alpha generator – which is any financial instrument (i.e. a stock, currency, etc.)

More information about structured product can be found in the Personal Money Magazine May 2008 issue (page 28-31), by Celine Tan.

Features of PNB Structured Investment Fund

• invest up to 80 per cent of the fund in structured products issued by Deutsche Bank Malaysia, which may include bonds, stocks, equity-linked and hybrid products
• expected return: 6-7% per annum
• income distribution: annually
• the principal investment is protected when held to the five-year maturity.
• sales charge: up to 1.5%,
• management fee: up to 1% annually
• 50% will be invested in PNB REIT (real estate investment trust), which owns seven properties in Kuala Lumpur and Johor Baru worth about RM1 billion in total, including Menara PNB, PNB Darby Park, PNB Damansara, Menara Tun Ismail, Wisma KPMG, Menara and Plaza Pelangi, and Pelangi Leisure Mall. It was announced that the REIT is currently private, but there are plans to float it on Bursa Malaysia’s main board after the five-year tenure of the PNB SIF. In long term, these properties might be able to provide capital appreciation.
• The PNB properties registered healthy occupancy averaging over 93%
• Free insurance coverage on group personal accident takaful will be provided to individual unitholders, based on the amount of investment the unitholder would have in the fund.
• PNB SIF would be managed by Amanah Mutual Bhd
• Fund adviser would be Aseambankers Malaysia Bhd.
• Its structured products issuer would be Deutsche Bank (Malaysia) Bhd.

Because I haven’t read its prospectus, I wonder if there is a penalty incur for early redemption? There is nothing stated about the early unit redemption in the recent press release.

If in fact there is a shortfall for investors who can’t hold the investment for the whole tenure of five years, you might deeply consider the liquidity issue.

Who is qualified to invest in PNB SIF?

The SIF is open to individual and institutional investors at a net asset value of RM1 during the offer period, which will last for 45 days until June 25, or upon full subscription of the units.

• Minimum investment: 10,000 units for individuals and 50,000 units for institutions.
• Minimum additional investment: 1,000 units for individuals and 5,000 units for institutions during the offer period.
• There is no limit to the amount an investor can put in.

Should you invest in PNB SIF?

Looking at the popularity of ASN and ASW, PNB SIF may likely grab significant attention of conservative investors.

Since SIF will be exposed to REIT investment in commercial real estates owned by PNB, it is very likely to provide more than 6% return p.a. as told by the PNB president and group chief executive Tan Sri Hamad Kama Piah Che Othman during the launch.

If you don’t mind about the 5 years lock-in period, PNB SIF is suitable for investors looking for alternatives of Fixed Deposit.

Disclaimer:
Materials provided in this article are for information purposes only, and should not be considered an offer, or solicitation, to deal. How you choose to act on these information is entirely on your own.