Question 2: Investment in Mutual Fund (25 marks)

Mr Gan is planning to invest in the Public Aggressive Growth fund which is an actively managed fund. Particulars of the fund are as follows:

Asset Class: Equity

Net Asset Value per share: RM10.95

Fund Size (as at 31 May 2021): MYR 26.95 million

Annual Expense Ratio: 2%

Sales Charge (Front end Load): 5%

Beta of the Fund: 1.2

Required:

a) Based on the information given above, determine what is the offering price of the Public Aggressive Growth. (4 marks)

b) Assume that Mr Gan invents in Public Aggressive Growth funds at the NAV above. If he holds the investment for 2 years and sells his investment at a NAV of RM12.33, calculate his net return %. (6 marks)

c) Assume that PUBLIC AGGRESSIVE GROWTH provided a return of 15% (before fees and expenses) last year. The KLCI index provided a return of 12% for the same period. If the risk-free rate is 3%, assess the performance of the fund manager. (7 marks)

d) Instead of investing in the Public Aggressive Growth fund above, as an alternative Mr Gan could invest in fixed deposit with a bank paying 3% interest per annum. If Mr Gan plans to invest for two years, what annual rate of return must the Public Aggressive Growth fund provide to Mr Gan for him to be better off compared to placing it in a bank fixed deposit. Assume returns are compounded. (8 marks)