7B.12 PRS Funds: Number, Core and Non-Core Funds, Objectives, Risk Profiles, Asset Classes, Authorisation and Naming

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

7B.12 PRS Funds: Number, Core and Non-Core Funds, Objectives, Risk Profiles, Asset Classes, Authorisation and Naming

Key Takeaways Explain This Topic AI

A PRS may comprise up to seven funds, or up to 10 funds if the PRS Provider offers both conventional and Islamic fund options, and it must always offer the three core funds.

Core funds must be named with the PRS Provider's name followed by "Growth Fund", "Moderate Fund" or "Conservative Fund".

The SC may revoke a PRS fund's authorisation if the fund is not launched within six months of authorisation, unless the SC has approved an extension.

A PRS fund may invest in derivatives provided its global exposure from derivatives positions does not exceed its NAV at all times.

Among index funds, emerging-market equity country index funds are described as very risky, while global bond index funds are less risky than equity index funds but riskier than cash management funds.

Last updated: October 2026

How Many Funds?

• Rule Detail
• Minimum The PRS Provider must at all times offer the three core funds (conservative, moderate, growth)
• Maximum Up to seven funds in a scheme

With Islamic options Up to 10 funds if the provider offers both conventional and Islamic fund options; alternatively a separate scheme can be set up for Shariah-compliant funds only

The default option serves members who pick a provider but no fund (for example employer-channelled contributions), so contributions go to a fund suited to their age.

Objectives and Risk Tolerance

The investment objective of the scheme and each fund must be stated clearly, specifically and sufficiently in the deed .

Members have different objectives and risk tolerances . The PRS Consultant must explain the volatility of each fund and the possibility of substantial capital loss : higher potential returns come with higher risk.

The age-based default may not suit everyone : some young members are risk-averse, some older members are not. Confirm the member is comfortable with a core fund's risk before recommending it.

• Core fund Age band Allocation focus Volatility tolerated
• Conservative 55 and above Conserving capital ; mainly income-generating assets Minimum
• Moderate 45 to 54 Continue growing the portfolio in real terms without high market risk Moderate
• Growth Below 45 Grow the portfolio steadily; risks appropriate to returns High
• Applying the default option

Member Default core fund What the Consultant should check

Mr Tan, 30, very risk-averse Growth (below 45) Explain that the growth fund tolerates high volatility. He may actively choose the moderate or conservative fund instead, because PRS Guidelines paragraph 11.11 lets a member select any core fund regardless of age

Puan Rosnah, 56, other income secured, long horizon Conservative (55 and above) She accepts more volatility than the default assumes, so a moderate fund or a suitable non-core fund may fit better

Risk and Return Profiles of Fund Types

Fund type Profile in the study guide

Cash management fund Mainly money market instruments and deposits; low volatility; returns similar to fixed deposits; least risky

Country index fund – emerging-market equities For example China's Shanghai Composite or India's Nifty; very volatile and very risky (100% emerging-market equities)

Country index fund – developed-market equities For example the UK or Japan; more established companies; less risky than emerging markets but riskier than funds with less equity

Regional equity index fund More diversification across countries (for example Asian REITs); less risky than a single-country index, riskier than bond funds

Global bond index fund Many countries and issues; stable returns; less risky than equity funds , riskier than cash management funds

Volatility measures how much a price varies over time. A volatile fund's daily returns move within a wide band ; a less volatile fund's within a narrow band .

Asset Classes in PRS Funds

Asset class Key points

Bonds Debt lent to a corporate, supranational or government borrower for a fixed period at a fixed rate; lower credit quality and longer maturity mean a higher expected interest rate

Equities Ownership with a residual claim after all prior claims; returns from dividends and capital gains

Money market instruments Highly liquid, maturity under a year: certificates of deposit, bankers' acceptances, treasury bills, commercial paper, repos

Collective investment schemes Unit trusts, REITs, ETFs, wholesale funds, closed-end funds; offer professional management, cost sharing and diversification

Derivatives Value derived from underlying assets (futures, forwards, options, swaps); listed or OTC, provided the fund's global exposure from derivatives does not exceed its NAV at all times; can hedge (for example a currency option on US dollar receivables) or speculate (for example bond futures betting on falling rates)

Real estate Land and permanent fixtures (residential, commercial, industrial); prices driven largely by local factors such as jobs, crime, schools, property taxes, shops and road access

Worked example: the derivatives limit. A PRS fund with a NAV of RM80 million may hold listed or OTC derivatives only while its global exposure from those positions stays at or below RM80 million , at all times. Under the commitment approach in the PRS Guidelines, global exposure adds up the absolute exposure of derivatives that are not netted or hedged, the net exposure of those that are, and certain cash collateral. The underlying of a derivative must be a permitted investment, or a commodity, index, interest rate or exchange rate, and commodity derivatives must be settled in cash .

Authorisation and Naming

Topic Rule

Authorisation Core and non-core funds must be authorised by the SC ; a scheme application must include at least the core funds ; non-core funds can be added any time after

Revocation False or misleading information or a material omission; the fund not launched within six months of authorisation (unless the SC approves an extension); breach of SC directions or the PRS Guidelines; or to protect the public or members

Core fund names "(PRS Provider name) – Growth Fund" , "– Moderate Fund" and "– Conservative Fund"

Non-core fund names Must be not inappropriate and not misleading ; the SC can require a change to the name of the scheme, a fund or a class of units

The current PRS Guidelines (paragraphs 7.03A and 7.12, revised 1 October 2024) word two of these rules differently from the 2025 study guide. The six-month launch condition applies to any fund under a scheme, not only to core funds, and the non-core naming test is "not inappropriate and not misleading". The study guide's extra words, core funds and names that conflict with another fund, come from older wording.

FIMM's practice question: for Provider Delta, "Delta Growth Fund" and "Delta Moderate Fund" are acceptable core-fund names, while names such as "Delta Cash Management Fund" or "Delta FBMKLCI Tracker Fund" are not core-fund names.