Public Global Select Fund (PGSF) Review And Analysis

This article analyzes and reviews the Public Global Select Fund (PGSF).

For your information, the PGSF is a unit trust fund managed by Public Mutual Berhad in Malaysia.

The fund invests primarily in equities or stocks of companies on a global basis.

Apart from equities, the fund also invests in collective investment schemes such as ETFs and other equity funds managed locally as well as abroad.

The following is a list of topics in this article.

Enjoy!

Fund Summary

The following summary is obtained from the annual report for the financial year ended 31 May 2022.

Category

Equity

Investment Objective

To seek long-term capital appreciation by investing in equities and collective investment schemes in domestic and global markets.

Launch Date

28 Sep 2006

Distribution Policy

Incidental

Risk Level

Very High – 5 (on a scale of 1 – 5)

Volatility

Moderate – 15.6 By Lipper Analytics

Size

MYR2.1 billion (USD475 million based on an exchange rate of USD1 = MYR4.5) as of the end of the financial year ended 31 May 2022.

Shariah Compliant

No

Sales Charge

Up To 5%

Expenses

1.78% Of Fund NAV On Average From 2020 To 2022

Performance

Average annual return for the following years ended 31 May 2022.

Years	Average Annual Return (%)
1 Year	-4.74
3 Years	15.45
5 Years	10.62
10 Years	20.43

Annual total return for the financial year ended 31 May.

Years	Annual Total Return (%)	Benchmark (%)
2022	-4.74	-2.63
2021	30.27	NA
2020	17.97	NA
2019	1.73	NA
2018	2.83	NA

In 2022, the Public Global Select Fund (PGSF) as a whole, which consists primarily of equity and collective investment funds, ie. ETF, registered an annual total return of -4.74% for the financial year under review and the performance was slightly worse than the benchmark’s return of -2.63%.

The total return of -4.74% was achieved based on a cumulative return of equity and money market which came in at -3.01% and 0.20%, respectively, for the financial year ended 31 May 2022.

Adjusting for an expense of 1.93%, the total return of the unit trust fund totaled -4.74% for the financial year 2022.

According to the PGSF’s 2022 annual report, the lower performance of the fund compared to the benchmark was primarily due to the lower return of selected Technology and Communications stocks on concerns over the rise in global interest rates.

Other performance data for the financial year ended 31 May.

Unit Prices (MYR) => prices quoted are ex-distribution

	As at 31 May
	2022	2021	2020
Highest NAV per unit for the year	0.4641	0.4657	0.3801
Lowest NAV per unit for the year	0.3754	0.3480	0.2878

Net Asset Value (NAV) and Units In Circulation (UIC) as at the end of the financial year

	As at 31 May
	2022	2021	2020
Total NAV (MYR’000)	2,136,584	1,653,324	1,041,700
UIC (in ’000)	6,068,280	4,026,549	2,940,012
NAV per unit (MYR)	0.3521	0.4106	0.3543

Total Expense Ratio

	As at 31 May
	2022	2021	2020
Total Expense Ratio (%)	1.79	1.77	1.77

A lower ratio is preferable as it indicates lower expenses.

Portfolio Turnover Ratio

	As at 31 August
	2022	2021	2020
Portfolio Turnover Ratio (time)	1.02	1.30	0.82

A lower ratio is preferable as it indicates lower trading activities and thus, lower trading fees.

Cash Distribution And Unit Split

	Declaration Date
	2022	2021	2020	2019	2018
	05-31	05-31	05-29	05-31	05-31
Net Distribution Per Unit (Cent In MYR)	4.00	5.00	2.00	0.50	1.25
Yield (%)	8.6 – 10.7	10.7 – 14.4	5.3 – 6.9	–	–
Net Distribution To Net Income Ratio (%)	-175	56	–	–	–
Net Distribution To Cash Flow From Operations Ratio (%)	-37	-59	–	–	–
Unit Split	–	–	–	–	–

The Public Global Select Fund (PGSF) declared a cash distribution of MYR0.04 per unit in 2022, giving a massive yield of between 8.6% to 10.7% based on the lowest and highest NAV value of MYR0.3754 and MYR0.4641, respectively, reported in the financial year 2022.

Between 2018 and 2022, the PGSF unit trust fund had consecutively declared cash distributions without fail in the past 5 years.

The yield of the PGSF unit trust had been quite substantial in the past.

For example, in 2022, the yield was between 8.6% and 10.7% on the back of a cash distribution that totaled MYR0.04 or MYR4.0 cents per unit.

The yield was even more massive in 2021, reportedly between 10.7% and 14.4% when the fund declared a cash distribution of MYR0.05 or MYR5.0 cents per unit.

While the unit trust fund had been quite generous in giving out cash to investors, it came at a cost.

For example, in the financial year 2022, the ratio of cash distribution to net income came in at -175%, due primarily to a net loss after tax.

In terms of cash flow, the PGSF unit trust fund generated a negative operating cash flow, amounting to -MYR662 million.

Despite negative cash flow, the Public Global Select Fund still managed to declare a cash distribution, thereby causing the ratio of cash distribution to operating cash flow to tumble to -37%.

A similar negative cash flow ratio of -59% was reported in 2021.

As a result, the PGSF unit trust fund consumed the entire retailed earnings and was sitting on an accumulated loss of MYR89 million in the financial year 2022.

For your information, the net loss after taxation in 2022 was MYR139 million while the respective operating cash flow generated in the same financial year was -MYR662 million.

Also, the Public Global Select Fund (PGSF) unit trust has never initiated a unit split in the last 5 years from 2018 to 2022.

Income Received

	As at 31 May
	2022 MYR’000	2021 MYR’000
Interest Income	2,578	1,111
Distribution Income	5,848	5,324
Dividend Income	9,098	8,072
Total Income	17,524	14,507
Average NAV	1,894,954	–
Average Yield %	0.9	–

The table above shows the breakdown of the income received by the unit trust fund PGSF.

As seen, the Public Global Select Fund received various sources of income such as interest income, distribution income, and dividend income.

In 2022, the PGSF received a total income of MYR17 million compared to only MYR14.5 million reported in 2021.

As a result, the average income yield for the financial year 2022 totaled only 0.9%, which in my opinion is quite minimal.

Asset Allocation – Equities

	As at 31 May (% of NAV)
	2022 %	2021 %	2020 %
Malaysia
Financial	0.2	0.2	0.2
Australia
Consumer Non-Cyclical	–	3.4	–
China
Consumer Non-Cyclical	1.7	–	–
Germany
Consumer Cyclical	0.8	–	–
Hong Kong
Communications	4.5	–	–
Consumer Cyclical	0.9	–	–
Financial	2.9	–	–
Sub Total	8.3	–	–
Korea
Communications	1.7	–	–
Consumer Non-Cyclical	0.3	–	–
Sub Total	2.0	–	–
Netherlands
Technology	–	2.7	1.7
Thailand
Consumer Cyclical	–	2.9	–
United States
Communications	11.9	12.2	9.2
Consumer Cyclical	3.9	7.7	7.0
Consumer Non-Cyclical	7.6	10.7	4.7
Financial	8.7	6.9	8.8
Industrial	1.9	4.9	3.1
Technology	19.3	29.1	19.3
Sub Total	53.3	71.5	52.1
TOTAL EQUITY SECURITIES	66.3	80.7	54.0

In terms of equity holdings, the Public Global Select Fund (PGSF) had the largest position in the U.S., at 53.3% of NAV as of 31 May 2022.

Of all the equity holdings in the U.S., 19% of the NAV of the fund was invested in the Technology sector while 12% was invested in the Communications sector.

The Financial sector came in at the 3rd spot at 9% of the fund’s NAV.

These are the largest equity holdings of the Public Global Select Fund (PGSF) in the U.S.

Despite making up 53% of the unit trust’s NAV, the equity position in the U.S. actually had declined significantly from the prior year which topped out at a massive 71.5%.

Another foreign country in which the Public Global Select Fund (PGSF) had a major equity position was Hong Kong, notably at 8.3% as of 31 May 2022.

The PGSF unit trust held only a minor interest in the rest of the countries, ie. only 2% of NAV in Korea and 1.7% in China.

Also, the fund sold off its equity positions in several countries in 2022, including Australia, the Netherlands, and Thailand.

On a cumulative basis, the Public Global Select Fund (PGSF) had an equity holding that totaled 66.3% of NAV in 2022, down significantly from the 80.7% reported in 2021.

The massive decline in equity holdings of the fund in 2022 from the prior year may indicate an unfavorable equity market on a global basis in 2022 and beyond.

That said, the PGSF fund manager may be expecting a bearish stock market in 2022 and beyond, especially in the U.S. stock market in which the unit trust fund had divested a significant portion of the investment.

Asset Allocation – Collective Investments

	As at 31 May (% of NAV)
	2022 %	2021 %	2020 %
COLLECTIVE INVESTMENT FUNDS
France
Funds	3.6	1.8	5.7
Germany
Funds	11.8	12.1	10.7
Japan
Funds	6.7	5.4	6.2
United States
Funds	–	1.5	15.5
COLLECTIVE INVESTMENT SCHEMES
Funds	3.3	4.1	4.8
TOTAL COLLECTIVE INVESTMENTS	25.4	24.9	42.9

In terms of collective investments such as ETFs and equity funds, the Public Global Select Fund (PGSF)’s position in this particular investment remained the same in 2022 compared to that of 2021.

However, the holdings of ETF and equity funds in the unit trust changed dramatically in 2022 compared to 2020 when the percentage of NAV declined from 43% to only 25%.

Again, the massive reduction in collective investment holdings as of 2022 may indicate a less favorable equity market in 2022 and beyond compared to that of 2020.

Asset Allocation – Total

Change In Portfolio Exposures

	As at 31 May
	2022 %	2021 %	Change (%)
Investment Type
Equity and equity-related securities	82.3	94.1	-11.8
Money market	17.7	5.9	+11.8

The total equity portfolio of the Public Global Select Fund (PGSF) has dipped by 11.8% from 94.1% reported in 2021 to 82.3% reported in 2022.

In contrast, the cash holding or money market position of the fund has increased by 11.8% to reach a total percentage of 17.7% as of May 31, 2022.

In other words, the fund held more liquid assets in 2022 than in 2021.

Money market instrument is considered more liquid than equity.

That said, the cash position of the fund increased quite substantially in 2022, notably at more than 2X its 2021 percentage.

Again, the considerable rise of cash or liquid assets in the fund may indicate a less favorable stock market in 2022 compared to 2021.

While cash may generate a less favorable return compared to equity, the fund manager may use the cash to make opportunistic buying of undervalued equity.

Cash And Deposits (Liquid Assets)

	As at 31 May
	2022 (MYR’000)	2021 (MYR’000)
Liquid Assets
Deposits With Financial Institutions	401,880	56,332
Cash At Banks	68,024	66,799
Total Net Assets
Net Asset Value (“NAV”)	2,136,584	1,653,324
Ratio Of Liquid Assets To NAV (%)	22.0	7.4

As discussed in prior discussions, the Public Global Select Fund (PGSF) held a considerable amount of cash and money market instruments as of 2022.

The strong cash position is also reflected in the balance sheet as shown in the table above.

As seen, as of 31 May 2022, the liquid assets to NAV ratio totaled 22.0% of NAV or MYR470 million, a sizable number compared to the 2021 figure.

The massive growth of the cash position in the unit trust fund in 2022 shows that the fund had rebalanced to a rather defensive portfolio and was ready to make opportunistic buyings of undervalued equity.

Again, the large cash position in 2022 may indicate an unfavorable outlook for the global equity market in 2022 and beyond.

Top 10 Equities – Global

		As at 31 May 2022
		Fair Value (MYR’000)	Percent Of NAV (%)
Equity Securities	Related Sectors
Apple Inc	Technology	130,295	6.1
Microsoft Corp	Technology	118,997	5.6
Alphabet Inc – Class A	Communications	99,587	4.6
Amazon.com, Inc	Communications	89,447	4.2
Ping An Insurance (Group) Company of China, Ltd	Financial	63,140	2.9
Visa Inc	Financial	55,720	2.6
Mastercard Incorporated	Financial	54,824	2.6
Meta Platforms Inc	Communications	50,854	2.4
ServiceNow, Inc	Technology	40,922	1.9
The Boeing Company	Industrial	40,835	1.9
Total	–	744,621	34.8

The table above shows the top 10 equity holdings of the Public Global Select Fund (PGSF) on a global basis.

At the top spot, Apple Inc came in at 6.1% of NAV or MYR130 million as of 31 May 2022, making it the largest holding of the fund.

At 5.6% of NAV or MYR119 million, Microsoft Corp held the second spot in the fund.

Alphabet Inc topped the 3rd place at 4.6% of NAV or MYR100 million.

For your information, the top 3 equity holdings of the unit trust fund alone made up roughly 16% of the fund’s NAV or MYR350 million.

These are mega-cap blue-chip companies located in the U.S. and their businesses are primarily technology related.

Similarly, of all the top 10 equities, a majority of them are involved in the technology and financial sectors, not to mention that they are at least USD$100 billion in market capitalization.

Therefore, these are stable and strong companies with well-established businesses.

Despite the defensive strategy of the portfolio, the top 10 equity holdings of the unit trust fund made up only 35% of the fund’s NAV as of May 31, 2022, a reasonably low percentage.

On average, each equity in the top 10 holdings took up only 3.5% of the fund’s NAV.

This composition should make the Public Global Select Fund (PGSF) less risky and less volatile.

Despite the lower percentage of equity exposure, nearly all companies in the top 10 positions are located in the United States.

This concentrated portfolio makes the fund depends rather heavily on the U.S. economy and the American stock market as a whole.

Top 10 Collective Investments – Global

		As at 31 May 2022
		Fair Value (MYR’000)	Percent Of NAV (%)
Collective Investments	Related Country
MSCI Europe Index UCITS ETF	Germany	128,621	6.0
iShares Core MSCI Europe UCITS ETF	Germany	123,236	5.8
SPDR MSCI Europe UCITS ETF	France	76,803	3.6
Daiwa Exchange Traded Fund	Japan	48,557	2.3
NEXT FUNDS TOPIX ETF	Japan	47,985	2.2
Nikko Exchange Traded Index Fund	Japan	47,449	2.2
Sub Total		472,651	22.1
Public Islamic Asia Tactical Allocation Fund	Malaysia	26,636	1.2
Public Asia Ittikal Fund	Malaysia	24,535	1.2
Public Islamic Global Equity Fund	Malaysia	11,105	0.5
Public e-Islamic Sustainable Millennial Fund	Malaysia	8,725	0.4
Sub Total		71,001	3.3
TOTAL COLLECTIVE INVESTMENTS	–	543,652	25.4

The collective investments are divided into 2 categories and they are ETFs and unit trusts.

As shown in the table above, the majority of the collective investments fall into ETFs.

All collective investments invested in Malaysia are unit trusts, ie. Public Islamic Asia Tactical Allocation Fund.

The rests are ETF or exchange-traded funds.

In terms of collective investment, the Public Global Select Fund (PGSF) held as much as 25% of NAV in its portfolio.

Of the 25%, 22% was invested in ETFs while the remaining 3% was invested in unit trusts managed by Public Mutual.

In terms of ETFs, the MSCI Europe Index UCITS ETF made up a massive 6% of the fund’s NAV or MYR129 million in monetary value, making it the largest holding in PGSF.

The 2nd place went to iShares Core MSCI Europe UCITS ETF which made up as much as 5.8% of the fund’s NAV or MYR123 million.

The SPDR MSCI Europe UCITS ETF claimed the 3rd spot at 3.6% NAV or MYR77 million.

Unit trusts made up only 3.3% of the portfolio NAV as of 31 May 2022.

The massive portion of collective investment, notably at 25.4% as of 31 May 2022, in the Public Global Select Fund (PGSF) makes the unit trust less risky and less volatile as ETFs and unit trusts are diversified investments.

Unit Price Vs Benchmark

PGSF Unit Price Vs S&P Global LargeCap

For your information, the S&P Global LargeCap Index comprises the stocks representing the top 70% of float-adjusted market cap in each developed and emerging market.

In this section, we compare the PGSF unit price with the S&P Global LargeCap index to check on the sensitivity of the unit price with respect to the index.

As seen, the unit price of the Public Global Select Fund (PGSF) nearly follows the volatility of the S&P Global LargeCap index.

However, a part of the plot, in Nov 2022, shows that the unit price moved in an opposite direction to the index.

For example, between Nov and Dec 2022, the S&P Global LargeCap index was moving upward but the PGSF unit price was moving downward.

Therefore, the correlation between the 2 indexes is rather weak.

Despite the weak correlation, both the PGSF unit price and the S&P Global LargeCap index have been on a rise since October 2022.

In the following section, we will go ahead to find out the relationship between the unit price of the fund and the S&P Global LargeCap index.

For example, for every 1-point change in the S&P Global LargeCap index, how much of that will affect the PGSF unit price?

Let’s move on to find out.

Positive Changes

	Positive Changes
	S&P Global LargeCap Index Changes	PGSF Unit Price Changes In MYR	Rise Ratio
Date
12/13/2022	4.65000	0.00480	0.001032
12/12/2022	2.02000	0.00160	0.000792
12/08/2022	2.88000	0.00550	0.001910
12/01/2022	3.07000	0.00100	0.000326
11/30/2022	9.33000	0.00410	0.000439
11/25/2022	1.16000	-0.00710	-0.006121
11/23/2022	3.49000	0.00330	0.000946
Average	–	–	0.000582

The table above shows the correlation between the S&P Global LargeCap index and the PGSF unit prices in an upward direction.

Based on the 90-day data between Sept and Dec 2022, the average ratio came in at 0.000582.

At this ratio, a 1-point index increment in the S&P Global LargeCap index will result in an MYR0.000582 increase in the PGSF unit price.

For a 10-point index increment, the PGSF unit trust fund will increase by MYR0.00582 or MYR0.6 cents on average.

Negative Changes

	Negative Changes
	S&P Global LargeCap Index Changes	PGSF Unit Price Changes In MYR	Fall Ratio
Date
12/09/2022	-0.59000	0.00110	-0.001864
12/07/2022	-1.92000	-0.00290	0.001510
12/06/2022	-5.36000	-0.00180	0.000336
12/05/2022	-4.39000	-0.00360	0.000820
12/02/2022	-1.48000	-0.00360	0.002432
11/29/2022	-4.84000	-0.00010	0.000021
11/21/2022	-1.49000	-0.00330	0.002215
Average	–	–	0.001269

The table above shows the correlation between the S&P Global LargeCap index and PGSF unit prices in a downward direction.

Based on the 90-day data between Sept and Dec 2022, the average ratio came in at 0.001269.

The average ratio indicates that when the S&P Global LargeCap index falls by 1 index point, the PGSF unit price will fall by about MYR0.001269 on average.

From a 10-point perspective, the PGSF unit price will fall by about MYR0.01269 or MYR1.3 cents on average.

Since the falling ratio is twice as large as the rising ratio, the Public Global Select Fund (PGSF) unit price will be more sensitive to an index drop than an index rise.

As a result, the PGSF unit trust will have a unit price drop more than a unit price rise when the S&P Global LargeCap index moves.

Review Summary

There are a couple of red flags about the Public Global Select Fund (PGSF) unit trust.

First off, the unit trust fund paid out a large sum of cash distribution despite having negative earnings and operating cash flow in the financial year under review.

That said, as of May 31, 2022, the PGSF unit trust had an accumulated loss of MYR89 million.

In terms of market resilience, the PGSF is more sensitive toward a market drop than a market rise as the falling ratio is twice as high as that of the rising ratio.

This trend is seen in the chart during a market rise in the S&P Global LargeCap index, and the PGSF unit price fell.

In other words, the PGSF unit price may decline in a rising market.

And, when the market falls, the PGSF unit price will decline even more.

On the bright side, the Public Global Select Fund (PGSF) unit trust is less risky and less volatile compared to a unit trust that is weighted more toward equity.

As seen, the Public Global Select Fund (PGSF) held a significant portion of cash or money market as of the financial year 2022.

Moreover, the fund also held a significant portion of ETFs in its portfolio.

Also, investors may want to watch out for the U.S. market as the PGSF unit trust held a whopping 53% of NAV in equities traded in the American stock exchange.

References and Credits

1. All financial information in this article was obtained and referenced from the following links:

a) Public Mutual Unit Trust Fund
b) S&P Global LargeCap index

Disclosure

The content in this article is for informational purposes only and is neither a recommendation nor advice to purchase a security. The Public Global Select Fund (PGSF) is not in any way sponsored, endorsed, sold, or promoted by StockDividendScreener.com.

Therefore, StockDividendScreener.com shall not be liable (whether in negligence or otherwise) to any person for any error in this article.

If you find the information in this article helpful, please consider sharing it on social media and also provide a link back to this article from any website so that more articles like this one can be created in the future. Thank you!

Other Trending Unit Trust