Does Asset Allocation Explain the Styles and Performance of Private Retirement Scheme Funds in Malaysia

The knowledge of equity style of PRS funds has benefited investors by mitigating the issue of asymmetric information between fund managers and investors. Using a return-based style analysis with PRS fund data from April 2013 to February 2015, our study found that: first, moderate funds have the highest degree of style of 61.31, followed by growth funds (52.37) and conservative funds (51.75). In other words, the fund managers of moderate funds practise more passive than active styles. Second, on average, conservative funds have the highest degree of selection (48.25) and lower degree of style. One would expect the opposite as conservative funds should act more like passive rather than active fund. Third, growth funds have higher degree of section (47.63) as compared to moderate funds. Fourth, conservative funds, as the name implies, have strong focus on the fixed income products rather than equity. Lastly, in terms of asset allocation to equity, on average, growth funds have higher allocation to foreign equity of 16.28, followed by moderate funds (9.18). In addition, growth funds focus on large growth stocks, while moderate funds focus on large value stocks. To the best of the authors' knowledge, this study is the first academic research done on PRS funds after the scheme was launched in July 2012. It is hope this study can be the catalyst for more academic work on this subject