Establish an Investment Fund in Malaysia
Updated on Monday 26th December 2022
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The fund management industry in Malaysia is a developed one and the country is becoming one of the key locations for basing an asset management company in South East Asia. Investment funds have assets from various sources, including but not limited to unit trust funds, private pension funds or corporations.
Investors who wish to start a fund in Malaysia are required to comply with the operational requirements for their chosen type of fund as well as the restrictions or the conditions that may apply. Moreover, they should know that licensing is mandatory and should prepare for the compliance requirements for this purpose. Another issue to decide upon is the type of investors that the fund will target. Some of the available investment funds target solely experienced investors while others are also appropriate for an individual with little to no investment experience.
In order to establish an investment fund in Malaysia, the founder must observe a set of basic regulations. Foreigners can request the help of a law firm in Malaysia during the fund incorporation phase.
The funds that investors choose to invest in are the following:
- equities;
- fixed income securities;
- unit trust funds;
- private equities;
- money market placements.
Real Estate Investment Trusts (REITS) or Syariah Funds are also two available options. Equity unit trusts are among the most popular because they allow investors to access the Malaysian companies listed on Bursa Malaysia. Fixed income funds will have a more limited investment option (such as corporate bonds) but they provide regular income.
One of the experts at our law firm in Malaysia is able to give you detailed information about the types of unit trusts and how you can set-up any one of them in Malaysia. We also invite you to watch the following video:
As a key step for starting an investment fund in Malaysia, investors should consider defining their business strategy. This is important as investors will need to decide on their target group, the type of legal entity they will choose to establish the fund and how the fund will be capitalized property, how the internal control rules will be implemented and how it will follow the ongoing regulatory guidelines.
Our team of attorneys in Malaysia can answer any questions concerning the types of funds and their structuring in the country. Below, we discuss some of the laws that are relevant to this field.
If you are interested in applying for citizenship in Malaysia, our lawyers can help you from a legal point of view. They can successfully manage the formalities related to the documents, as well as the relationship with the relevant authorities. It is important to have specialist help on your side, in order not to encounter problems or complexities in your application. We also offer free case evaluation, so contact us right away.
The types of collective investment schemes available in Malaysia include:
- unit trusts;
- real estate investment trusts;
- exchange-traded funds;
- close-end funds;
- foreign collective investment schemes;
- Islamic unit trusts.
Our lawyers in Malaysia can help you with additional information about the rules and regulations set forth by the Securities Commission regarding all of these fund types. The sustainability of one type of fund, as well as its risks, should be carefully calculated before making an investment decision.
Equity funds, balanced funds, and money market funds are three types of unit trusts that can be set-up by investors in Malaysia. The difference between them lies not only in the type of effective investment but also in their objective and growth in time. For example, an equity fund can provide capital appreciation over the medium and long term and is suited for aggressive investors who target risk-return rewards. On the other hand, the income or bun fund provides a regular income and is more suited for conservative investors.
The balanced fund is a good solution for those investors who want to invest in stock and in bonds. It offers a regular income and can show good growth over time. Real Estate Investment Trusts can also be a good option for foreign investors in Malaysia who target investments in properties, usually commercial units.
Investors who wish to start a fund in Malaysia are required to comply with the operational requirements for their chosen type of fund as well as the restrictions or the conditions that may apply. Moreover, they should know that licensing is mandatory and should prepare for the compliance requirements for this purpose. Another issue to decide upon is the type of investors that the fund will target. Some of the available investment funds target solely experienced investors while others are also appropriate for an individual with little to no investment experience.
In order to establish an investment fund in Malaysia, the founder must observe a set of basic regulations. Foreigners can request the help of a law firm in Malaysia during the fund incorporation phase.
Investment funds in Malaysia
The funds that investors choose to invest in are the following:
- equities;
- fixed income securities;
- unit trust funds;
- private equities;
- money market placements.
Real Estate Investment Trusts (REITS) or Syariah Funds are also two available options. Equity unit trusts are among the most popular because they allow investors to access the Malaysian companies listed on Bursa Malaysia. Fixed income funds will have a more limited investment option (such as corporate bonds) but they provide regular income.
The mutual fund is a commonly used financial vehicle with a portfolio comprised of stocks, bonds, and other securities. They allow access to individuals and small investors and it is accessible for this category of investors.
The types of mutual funds include the following:
- Open-ended: these are a popular type of short-term investment fund where the investors have no limit and can liquidate the money at any time.
- Closed-ended: often listed on the stock exchange to provide for liquidity; can only be redeemed after a certain period.
- Interval: are a combination of the two, meaning that the shares can be repurchased at different times.
- Others: debt funds, income funds, liquidity funds, balanced funds, equity funds, growth funds.
Investors have a number of benefits when choosing to establish a mutual investment fund. Diversification is one of the primary characteristics and this reduces the risk of the investment. Mutual funds can be easily bought or sold. Those interested in starting this type of investment fund in Malaysia should remember that the fund will be required to have an investment manager who will be properly licensed and will oversee the activity of the fund. His expertise in the management of portfolios and his trading skills will be the ones that will attract investment. Mutual funds require lower investment minimums compared to other investment vehicles suited for high-net-worth individuals.
One of the experts at our law firm in Malaysia is able to give you detailed information about the types of unit trusts and how you can set-up any one of them in Malaysia. We also invite you to watch the following video:
As a key step for starting an investment fund in Malaysia, investors should consider defining their business strategy. This is important as investors will need to decide on their target group, the type of legal entity they will choose to establish the fund and how the fund will be capitalized property, how the internal control rules will be implemented and how it will follow the ongoing regulatory guidelines.
Our team of attorneys in Malaysia can answer any questions concerning the types of funds and their structuring in the country. Below, we discuss some of the laws that are relevant to this field.
If you are interested in applying for citizenship in Malaysia, our lawyers can help you from a legal point of view. They can successfully manage the formalities related to the documents, as well as the relationship with the relevant authorities. It is important to have specialist help on your side, in order not to encounter problems or complexities in your application. We also offer free case evaluation, so contact us right away.
Collective investment schemes in Malaysia
The types of collective investment schemes available in Malaysia include:
- unit trusts;
- real estate investment trusts;
- exchange-traded funds;
- close-end funds;
- foreign collective investment schemes;
- Islamic unit trusts.
Our lawyers in Malaysia can help you with additional information about the rules and regulations set forth by the Securities Commission regarding all of these fund types. The sustainability of one type of fund, as well as its risks, should be carefully calculated before making an investment decision.
The Unit Trust Funds
Equity funds, balanced funds, and money market funds are three types of unit trusts that can be set-up by investors in Malaysia. The difference between them lies not only in the type of effective investment but also in their objective and growth in time. For example, an equity fund can provide capital appreciation over the medium and long term and is suited for aggressive investors who target risk-return rewards. On the other hand, the income or bun fund provides a regular income and is more suited for conservative investors.
The balanced fund is a good solution for those investors who want to invest in stock and in bonds. It offers a regular income and can show good growth over time. Real Estate Investment Trusts can also be a good option for foreign investors in Malaysia who target investments in properties, usually commercial units.
Laws regarding capital market investments in Malaysia
The Securities Commission in Malaysia is the enforcer of the available legislation in the fund management industry. The following Acts are the most important in terms of regulatory framework regarding trusts in Malaysia: the Securities Commission Act, the Capital Markets, and Services Act, the Securities Industry Act or the Futures Securities Act.
Investors should know that the Securities Commission grants authorizations for individuals who wish to engage in capital market activities only if certain criteria are met and when this is in the best interest of the country. The assessment will include the following:
- the area of specialization: and the level of expertise offered to the capital market should be notable, especially in terms of productivity, skills, and the quality of the services.
- the risk: the activity should pose no risk to the capital market or alter its usual functioning.
- the contribution: the business should attract investments, promote the development of the capital market.
- the significance: the Commission will also consider the degree and the significance of participation in the Malaysian capital market.
The applicant is also evaluated as per a “fit and proper” requirement and for this assessment, the Commission will look at the organizational requirements, the company’s shareholding structure, the financial resources and whether or not they are adequate and the level of competence of the company’s representative. One of our lawyers in Malaysia can provide investors with more information about the manner in which the Commission assesses applications for licensing for capital market activities.
Fund management companies in Malaysia are subject to a set of rules imposed by the Securities Commission. In the development of their activities, they must have a supervision and control system, act in the best interest of their clients and have a good business conduct.
Malaysia is evolving as one of the top locations in Asia for investment and fund services. The country already offers suitable solutions to investors and entrepreneurs in the banking sector, especially in Labuan, it's Federal Territory that is known as an offshore and financial center. As more investors are opening investment funds, here the offer grows in terms of financial products and services.
According to the Securities Commission, the following fund management statistics apply for 2019:
- asset allocation for overall fund management in August 2019: 384.05 billion RM;
- fixed-income securities in August 2019: 180.80 billion RM;
- unit trust funds asset allocation in August 2019: 31.73 billion RM;
- asset allocation on Sharia investment in August 2019: 67.47 billion RM equities.
Fund management and taxation in Malaysia
The available tax incentives for collective investment schemes include a tax exemption for interest income received by a unit trust fund from investments in fixed income securities and a stamp duty exemption for selling real estate to a real estate investment trust.
Foreign fund management companies in Malaysia can benefit from a 10% tax incentive on the income received for providing their services to foreign investors. Islamic funds can benefit from a tax exemption on statutory income. A real estate investment trust can benefit from a complete tax exemption on income if at least 90% of its total income is distributed.
Our lawyers in Malaysia can give you information about the standard tax rates for unit trust funds in the country.
Taxation in Malaysia
Investors in Malaysia who want to know more about general corporate taxation in the country can request the help of our lawyers in Malaysia. Corporate taxation in the country is based on residence, meaning that a company is considered a tax resident of it is managed from the country. The taxable income consists of all of the profits derived from Malaysia, including those from businesses, trade, dividends, interest, royalties and other types of profits. The standard corporate income tax rate is 24%.
Malaysia has signed a number of double tax treaties that allow for preferential withholding tax rates for companies or individuals who are both Malaysian residents and residents of the other treaty country.