1.2 Investment-Linked Funds Are Not UTS; Industry Growth and History

FIMM Combined Examination FCE

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1 Introduction: The FIMM Combined Examination (FCE)

0.1 FCE Exam Facts, Registration Rules and How to Use This Guide

2 Chapter 1: Understanding Collective Investment Schemes in Malaysia

1.1 What a Collective Investment Scheme Is and How Malaysian CIS Are Classified 1.2 Investment-Linked Funds Are Not UTS; Industry Growth and History 1.3 Participants in the CIS Ecosystem: Unit Holders, Managers, Trustees, Distributors and Regulators

3 Chapter 2: Introduction to UTS and PRS

2.1 UTS and PRS as Investments: Mechanics, Unit Calculations and How They Compare 2.2 Types of Funds: By Asset Class, Fund Structure and Investment Objective 2.3 Methods of Investing and Dollar Cost Averaging 2.4 Benefits and Disadvantages of Investing in UTS and PRS 2.5 Understanding Risk and the Risks of Investing in Schemes 2.6 Shariah-Compliant Schemes, Their Risks and the Role of the Shariah Advisory Council

4 Chapter 3: Regulatory Framework

3.1 The Regulatory Framework: The SC, Other Regulators and FIMM's Dual Role 3.2 Legislation, SC Guidelines and FIMM Rules Governing UTS and PRS 3.3 Regulation of Scheme Providers and Oversight Functions 3.4 The Deed, the Prospectus or Disclosure Document, and the Product Highlights Sheet 3.5 Portfolio Constraints: Permitted Investments, Liquidity, Borrowing and Exposure Limits 3.6 Regulations for Other CIS: Real Estate Investment Trusts and Exchange-Traded Funds 3.7 Regulation and Duties of the Scheme Trustee 3.8 Regulation of Marketing and Distribution: Distributor Categories, Collection Points and Agency Structure 3.9 Registration of Consultants: Eligibility, Fit and Proper, Duration, Variation and Revocation

5 Chapter 4 (Part 1): Marketing and Distribution — Disclosure and Transactions

4.1 Servicing Investors and the Contents of the Prospectus and Disclosure Document 4.2 The Product Highlights Sheet, Advertising Standards and Account Maintenance 4.3 The Purchase Process and Suitability Assessment Before Personal Advice 4.4 Cooling-Off Rights, Repurchase of Units, Suspension and Switching 4.5 Financing the Purchase of UTS: Process, Safeguards and the Risk Disclosure Statement 4.6 EPF Transfers and Withdrawals for Investment in Approved Unit Trust Funds

6 Chapter 4 (Part 2): Marketing and Distribution — Distributions, Reporting and Service

4.7 Distributable Income, Distributions and NAV, "Buying" a Distribution and Taxation 4.8 Reporting to Investors: Confirmations, Statements, and Semi-Annual and Annual Reports 4.9 Marketing Principles, Delivering Quality Service and Handling Complaints 4.10 The Effect of Inflation, Taxation and Investment Costs on Returns 4.11 Investment Alternatives to UTS and PRS

7 Chapter 5: Code of Ethics

5.1 Compliance, Ethics and the Structure of the FIMM Code of Ethics 5.2 Core Principle 1: Honesty and Integrity 5.3 Core Principle 2: Professionalism 5.4 Core Principles 3 to 5 and Non-Compliance: Conflicts, Disclosure, Confidentiality and Misconduct

8 Chapter 6: Personal Financial Planning

6.1 Personal Financial Planning: Definition, Features, Five Areas and the Six Steps 6.2 Financial Planner Credentials, Skills, Remuneration, and How a Planner Differs from a Consultant 6.3 The Consultant's Role in Investment Planning and Advising Clients Through the Life Cycle

9 Chapter 7A: Features and Operations of UTS

7A.1 Structure of a UTS, the Trust Deed, the Parties and Modifying the Deed 7A.2 UTS Fees, Charges and Expenses, and the Management Expense Ratio 7A.3 Dealing in Units, Valuation, NAV Calculation and Unit Prices 7A.4 Forward and Historical Pricing, and the UTMC's Holding of Units 7A.5 Unit Splits, Distributions and Their Effect on NAV 7A.6 Measuring UTS Performance: Returns, Performance Tables, Risk Measures and Qualitative Factors 7A.7 Operational Aspects of Shariah-Compliant UTS and PRS and the Shariah Contracts Between the Parties 7A.8 Borrowing to Invest in UTS and the Risks of Loan Financing

10 Chapter 7B (Part 1): The Pension Landscape and the PRS Framework

7B.1 The Malaysian Pension Landscape and the Adequacy of Retirement Savings 7B.2 The World Bank's Five-Pillar Pension Framework in the Malaysian Context 7B.3 Key Players: EPF, KWAP, LTAT, Employer-Sponsored Schemes and Annuities 7B.4 Why Malaysia Needs PRS: Ageing, Longevity Risk and the Benefits of PRS 7B.5 The PRS Framework and the Private Pension Administrator (PPA) 7B.6 PRS Structure, the Trust and Deed, Advantages over Other Products, Eligibility and Contributions

11 Chapter 7B (Part 2): PRS Operations

7B.7 The PRS Default Option and Tax Incentives for Members and Employers 7B.8 The PRS Account Structure (Sub-Accounts A and B) and Vesting 7B.9 PRS Withdrawals: Pre-Retirement, Retirement, Permanent Departure, Incapacity and Death 7B.10 Switching Between Funds and Transferring Between PRS Providers (Portability) 7B.11 Unclaimed Monies, Death of a Member and PRS Nomination 7B.12 PRS Funds: Number, Core and Non-Core Funds, Objectives, Risk Profiles, Asset Classes, Authorisation and Naming 7B.13 PRS Fees, Charges and Expenses 7B.14 PRS Unit Creation, Forward Pricing, Valuation, Distributions, Performance Measurement and Electronic Communication

1.2 Investment-Linked Funds Are Not UTS; Industry Growth and History

Key Takeaways Explain This Topic AI

Investment-linked funds of life insurers are not monitored by a Trustee, are not scrutinised by the SC and fall under the purview of Bank Negara Malaysia.

In an investment-linked fund, premiums less the cost of life cover and entry fees are invested in the insurer's investment pools at the pool's unit selling price.

Malaysia's first unit trust was set up in 1959 by Malayan Unit Trust Limited, and the Capital Issues Committee issued the first Guidelines on Unit Trust Funds in 1991.

The SC, established in 1993, became the sole regulator of collective investment schemes in 1996.

PRS was introduced in Malaysia in 2012 as the voluntary third pillar of a multi-pillar pension framework.

Last updated: October 2026

Why This Comparison Is Tested

Consultants often meet investors who hold, or are being offered, an investment-linked insurance policy . FIMM wants Consultants to understand that these products look similar to UTS but are legally and regulatorily different , and to explain that difference.

How an Investment-Linked Fund Works

The study guide describes the mechanics as follows:

The policyholder buys a life insurance policy that represents a number of units in an investment pool managed by the life insurer.

The policy can be bought with a single premium (like a lump sum) or regular premiums (like a unit trust regular savings plan).

Premiums less the cost of life cover and entry fees are allocated, at the policyholder's direction, to one or more investment pools, each with its own objective.

Each pool is divided into equal units. A policy's value is units held × unit price .

Units have a buy price and a sell price : net premiums buy units at the pool's selling price, and on surrender units are cashed in at the pool's buying price.

Investment management fees and other charges are deducted from the pool.

Pool returns are taxed at the life insurer's rate , and a provision for tax on unrealised gains is deducted before unit prices are set.

The most important sentence for the exam: investment-linked funds are not monitored by a Trustee, are not scrutinised by the SC and are not subject to the SC's disclosure rules. They fall under Bank Negara Malaysia (BNM). Investors must be told about this difference.

Feature UTS Investment-linked fund
Nature Pure collective investment Life insurance policy with investment units
Supervisor Securities Commission Malaysia Bank Negara Malaysia
Trustee Yes, independent scheme trustee No scheme trustee
Disclosure rules SC prospectus and Product Highlights Sheet (PHS) rules BNM insurance rules
Life cover None Included; cost deducted from premiums
Unit pricing Single NAV-based price Separate buy and sell prices
Seller FIMM-registered Consultant Licensed insurance agent

FIMM's own practice question asks whether investment-linked funds that invest in capital market products must comply with the SC's regulations. The answer is false : they follow BNM's rules.

Size and Growth of the Industry

The study guide makes three points:

Fund management has been the fastest-growing part of Malaysia's capital market over the last decade.

UTS and wholesale funds have been the main drivers of that growth.

The introduction of PRS added another option for investors saving for retirement.

The SC publishes up-to-date statistics on fund size and sources of funds on its "fund management products" analytics page. The FCE does not expect you to memorise current ringgit totals, which change constantly.

Milestones in the Development of CIS

Year Milestone
1868 The world's first unit trust, The Foreign and Colonial Government Trust , is set up in London
1950s Open-end investment companies ( mutual funds ) become popular in the United States
1959 Malaysia's first unit trust is established by Malayan Unit Trust Limited
1960s–1970s Unit trusts grow in popularity in the UK and Australia

1991 The Capital Issues Committee issues the Guidelines on Unit Trust Funds, the first CIS regulation in Malaysia

1993 The SC is established; UTS are jointly regulated by the SC and the Registrar of Companies
1996 The SC becomes the sole regulator of CIS
2012 PRS is introduced as the voluntary third pillar of retirement saving

Malaysia introduced unit trusts early compared with its neighbours, yet there was no regulation until 1991. After 1996 the focus was on developing UTS so that retail investors could take part in the stock market through professionally managed funds. In the 1990s many retail investors traded on rumours, which added to market volatility. Pooling their money under professional managers, and raising the share of institutional investors who could push for good corporate governance, were seen as ways to reduce that volatility.

PRS arrived in 2012 to tackle the adequacy of retirement savings as the population ages. It complements the mandatory EPF scheme and forms the third pillar of the World Bank's multi-pillar pension framework (Chapter 7B).

The Islamic Capital Market

The study guide also highlights the Islamic capital market (ICM) , a segment of the wider capital market that complements Islamic banking, takaful and the Islamic money market. The SC has developed the ICM on two fronts:

building the supporting infrastructure ; and

widening the range of Islamic products .

The ICM's growth has broadened the capital market and the financial services industry generally. Shariah-compliant UTS and PRS are covered in Chapter 2 and Chapter 7A of this guide.