Lecture Notes

FIN 358
Chapter 3
Subject INVESTMENT MANAGEMENT
Subject Code FIN 358
Chapter Chapter 3: Investment Instruments
Course Learning CLO1 Interpret the securities market and its various instruments
Outcome
Learning LO 1 Real and Financial Assets
Objectives LO 2 Advantages and Disadvantages of Real and Financial Assets
LO 3 Investment Instruments
Domain C2 (Comprehension)
Program Learning PLO 1 : Knowledge
Outcome (PLOs)
Lecturer Azah Atikah Binti Anwar Batcha

LO 1 Real and Financial Assets

Real assets are physical assets that have an intrinsic worth due to their substance
and properties. Real assets include precious metals, commodities, real estate, land,
equipment, and natural resources. They are appropriate for inclusion in most
diversified portfolios because of their relatively low correlation with financial assets,
such as stocks and bonds.

KEY TAKEAWAYS

 A real asset is a tangible investment that has an intrinsic value due to its
substance and physical properties.
 Commodities, real estate, equipment, and natural resources are all types of
real assets.
 Real assets provide portfolio diversification, as they often move in opposite
directions to financial assets like stocks or bonds.
 Real assets tend to be more stable but less liquid than financial assets.

Understanding Real Assets

Assets are categorized as either real, financial, or intangible. All assets can be said
to be of economic value to a corporation or an individual. If it has a value that can be
exchanged for cash, the item is considered an asset. Intangible assets are valuable
property that is not physical in nature. Such assets include patents, copyrights,
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brand recognition, trademarks, and intellectual property. For a business, perhaps
the most important intangible asset is a positive brand identity

Financial assets are a liquid property that derives value from a contractual right or
ownership claim. Stocks, bonds, mutual funds, bank deposits, investment accounts,
and good old cash are all examples of financial assets. They can have a physical
form, like a dollar bill or a bond certificate, or be nonphysical—like a money market
account or mutual fund.

In contrast, a real asset has a tangible form, and its value derives from its physical
qualities. It can be a natural substance, like gold or oil, or a man-made one, like
machinery or buildings.

Special Considerations

Financial and real assets are sometimes collectively referred to as tangible assets.
For tax purposes, the Internal Revenue Service (IRS) requires businesses to report
intangible assets differently than tangible assets, but it groups real and financial
assets under the tangible asset umbrella.

Most businesses own a range of assets, which typically fall into real, financial, or
intangible categories. Real assets, like financial assets, are considered tangible
assets. For example, imagine XYZ Company owns a fleet of cars, a factory, and a
great deal of equipment. These are real assets. However, the company also owns
several trademarks and copyrights, which are its intangible assets. Finally, the
company owns shares of stock in a sister company, and these are its financial
assets.

Real Assets vs. Financial Assets

Although they are lumped together as tangible assets, real assets are a separate
and distinct asset class from financial assets. Unlike real assets, which have intrinsic
value, financial assets derive their value from a contractual claim on an underlying
asset that may be real or intangible.

For example, commodities and property are real assets, but commodity futures,
exchange-traded funds (ETFs) and real estate investment trusts (REITs) constitute
financial assets whose value depends on the underlying real assets.
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It is in those types of assets that overlap and confusion over asset categorization
can occur. ETFs, for example, can invest in companies that are involved in the use,
sale or mining of real assets, or more directly linked ETFs can aim to track the price
movement of a specific real asset or basket of real assets.

Physically backed ETFs include some of the most popular ETFs in the world based
on volumes, such as State Street's SPDR Gold Shares (GLD) and iShares Silver
Trust (SLV). Both invest in precious metals and seek to mirror the performance of
those metal. Technically speaking, though, these ETFs are financial assets, while
the actual gold or silver bullion they own is the real asset.

LO 2 Advantages and Disadvantages of Real and Financial Assets

Advantages and Disadvantages of Real Assets

Real assets tend to be more stable than financial assets. Inflation, shifts in currency
values, and other macroeconomic factors affect real assets less than financial
assets. Real assets are particularly well-suited investments during inflationary times
because of their tendency to outperform financial assets during such periods.

In a 2017 report, asset management firm Brookfield cited a global value of real asset
equities totaling $5.6 trillion. Of this total, 57% consisted of natural resources, 23%
was real estate, and 20% was in infrastructure. In the firm's 2017 report on real
assets as a diversification mechanism, Brookfield noted that long-lived real assets
tend to increase in value as replacement costs and operational efficiency rise over
time. Further, the found that cash-flow from real assets like real estate, energy
servicing, and infrastructure projects can provide predictable and steady income
streams for investors.

Real assets, however, have lower liquidity than financial assets, as they take longer
to sell and have higher transaction fees in general. Also, real assets have higher
carrying and storage costs than financial assets. For example, physical gold bullion
often has to be stored in third-party facilities, which charge monthly rental fees and
insurance.

Pros
 Portfolio diversification
 Inflation hedge
 Income stream
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Cons
 Illiquidity
 Storage fees
 Transport costs
Real Asset vs. Financial Asset

Financial assets include stocks, bonds, and cash, while real assets are real estate,
infrastructure, and commodities. Assets are the backbone and lifeblood of the
economy, enabling us to create wealth.

 Financial Assets are highly liquid assets that are either in cash or can be fast
converted to cash. They include investments such as stocks and bonds. The major
feature of financial assets is that it has some economic value that is easily realized.
However, by itself, it has lesser intrinsic value.
 On the other hand, real assets are value-driven physical assets that a company
owns. They include land, buildings, motor cars, or commodities. Its unique feature is
that they have intrinsic value by themselves and don’t rely on exchanges to have
value.

The similarities between real and financial assets are that their valuation depends on
their cash flow generation potential.

The difference between them is that real assets are less liquid than financial assets
since real assets are difficult to trade, and they don’t have a competitive and efficient
exchange. They are more location-dependent, whereas financial assets are more
mobile, making them independent of their location.

Advantages

 Real assets have the advantage of stability as compared to financial assets. Inflation,
currency valuation, and macro-economic factors have more bearing on finances than
real.
 It has a strong negative correlation with financial markets.
 They are not dependent on financial market volatility. It is a profitable investment
alternative for risk diversification and offers profitability, not related to or dependent
on financial markets.
 They are a good hedge against inflation. When inflation is high, asset prices go up.
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 Unlike the capital market, the real assets market is complete with inefficiencies.
There is a lack of knowledge that makes the potential for profit high.
 It can be leveraged wherein real assets can be bought with debt.
 Cash flow from real assets like land, plant, and real estate projects provides the
investors with sound and steady income streams.

Disadvantages

 It has high transaction costs. When we buy shares or stocks, the transaction costs
are lower. But when buying it, the transaction costs are relatively high. The
transaction costs can affect the value of investments, and it may not be easy to make
a profit. It has low liquidity.
 Unlike financial assets that can be traded within a few seconds, these assets are
comparatively less liquid as land and building capital assets can’t be easily traded
without significant loss in value.
 Capital gains tax is applicable on the sale of real assets at a higher price. A property
sold within three years of purchase will be subject to short-term capital gains tax, but
long-term capital gains tax is applicable if sold after three years.
 The capital asset to be bought requires high capital investment. Because of high
capital costs buying and selling it becomes a challenge. It is why people generally
rely on borrowed funds to buy real assets.
 They also have higher maintenance costs than other forms of assets. The investment
is illiquid and locks up a huge sum of capital, which is difficult to redeem.

What are Financial Assets?

Financial assets can be defined as an investment asset whose value is derived from
a contractual claim of what they represent. These are liquid assets as the economic
resources or ownership can be converted into matter, such as cash. These are also
referred to as financial instruments or securities. They are widely used to finance real
estate and ownership of tangible assets.

These are legal claims, and these legal contracts are subject to future cash at a
predefined maturity value and predetermined time frame.
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Types of Financial Assets

These all can be classified into different categories according to the cash flow
features associated with them.

#1 – Certificate of Deposit (CD)

This financial asset is an agreement between an investor (here, company) and a

bank institution. The customer (Company) keeps a set amount of money deposited in
the bank for the agreed term in exchange for a guaranteed interest rate.

#2 – Bonds

This financial asset is usually a debt instrument sold by companies or the

government to raise funds for short-term projects.A bond is a legal document that
states the money the investor has lent the borrower, the amount it needs to be paid
back (plus interest), and the bond’s maturity date.

#3 – Stocks

Stocks do not have any maturity date. Investing in stocks of a company means
participating in the company’s ownership and sharing its profits and losses. Stocks
belong to shareholders until and unless they sell them.

#4 – Cash or Cash Equivalent

This type of financial asset is the cash or equivalent reserved with the
organization.

#5 – Bank Deposits

These are the cash reserve of the organization with Banks in saving and checking
accounts.

#6 – Loans & Receivables

Loans and Receivables are those assets with fixed or determinable payments. For
banks, loans are such assets as they sell them to other parties as their business.

#7 – Derivatives
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Derivatives are financial assets whose value is derived from other underlying assets.
These are contracts.

All the above assets are liquid assets as they can be converted into their respective
values as per the contractual claims of what they represent. They do not necessarily
have inherent physical worth like land, property, commodities, etc.

Financial Assets Classification

There is no single measurement classification technique suitable for all these assets.
However, they can be classified as Current Assets or Non-Current Assets on a
company’s balance sheet.

#1 – Current Assets

It contains those investment assets which are short-term in nature and are liquid
investments.

#2 – Non-Current Assets

Non-Current assets like shares of other companies or debt instruments held in the
portfolio for more than a year.

Advantages

 Some of these assets, which are highly liquid, can easily be used to pay bills or to
cover financial emergencies. Cash and cash equivalents come under this category.
On the other hand, one may have to wait for the stock to get money as they have to
be sold in exchange first, followed by settlement.
 It gives investors more security when they have more capital parked in liquid assets.
 It serves as a major economic function of financing tangible assets. It becomes
possible with the transfer of funds from those who have a surplus of it to where it is
needed for such financing.
 Financial assets distribute the risk as per the preferences and risk appetite of the
parties involved in the intangible asset’s investment. It represents legal claims to
future cash expected generally at a defined maturity and rate. The counterparties
involved in the agreement are the company that will pay the future cash (issuer) and
the investors.
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Disadvantages and Limitations

 Financial assets (liquid assets) like deposits in savings accounts and checking
accounts with banks are greatly limited in their return on investment, as there are
no restrictions for their withdrawal.
 Furthermore, these assets like CDs and money market accounts may prevent
withdrawal for months or years as per the agreement, or they are callable.
 It comes with a maturity date in the contract; attempting to cash out assets before
maturity calls for penalties and lower returns.

Important Points

 The value of this asset is determined by the demand and supply of such assets in the
market.
 These assets are valued as per the cash required to convert them, which again is
decided based on certain parameters. The value of people’s financial assets can
change significantly, especially if they have invested majorly in stocks.
 The measurement of financial assets cannot be done using a single measurement
method. Suppose we measure stocks when investments are small in quantum; the
market price can be considered to measure the value of the stock at that time.
However, if a company owns a large number of shares of other companies, the
market price of the share is not relevant because the investor holding the majority
shares may not sell them.
 Every financial asset has different risks and returns for its purchaser. For instance, a
car company usually has no idea about the sale of its cars, so the value of the
company’s stocks may increase or decrease. A bond can default as issuers may fail
to pay back the par value of a bond. Even cash and savings accounts have risks
associated, as inflation may impact purchasing power.

LO 3 Investment Instruments

Investment Instrument means an instrument containing a future right to shares of

Capital Stock, similar in form and content to this Agreement, purchased by investors
for the purpose of funding the Company's business operations.

We recommend using a varied approach to investing so that if something goes wrong

with one product, you don’t lose all of your money. The three major types of
investments products which the TTSEC regulates and which you can consider are:
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 Equities (stocks/shares)

 Bonds

 Mutual funds

Here is a simplified explanation of these investment products:

Stocks/Shares

Ownership of a corporation represented by shares. Shareholders are entitled to a

proportionate share in the corporation’s assets and profits.

Bonds

 A debt instrument issued by a private corporation or government agency to raise

money for various long term projects

 The investor is “lending” money to a company or a government

 There is a periodic interest payment which is normally stated “up front”

 The “loan” is paid in full at maturity

Mutual Funds

A mutual fund is a professionally managed collective investment scheme that pools

money from many investors to purchase a diverse mix of securities. Each investor
owns shares or units, which represent a portion of the holdings of the fund. The types
of securities that a particular fund invests in are identified for the benefit of investors
in the fund’s prospectus, which is a legal document, required by and filed with the
Trinidad and Tobago Securities and Exchange Commission.

Advantages:

 Simplicity – A minimum investment enables a small investor to get a full-time

investment manager to make and monitor investments

 Diversification – An investor obtains a broader range of investments than he

could purchase individually.

 Liquidity – The investor can request that his shares be converted into cash as
per the rules of the fund.
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TYPES OF INVESTMENTS

Products range from simple and basic bank deposits to more complex structured
finance instruments

Investment products in the capital market (securities) include shares, unit trusts,
warrants, bonds and private retirement schemes

These products can cater to the needs of various types of investors such as retail,
sophisticated, young, senior citizen, bold, and risk averse, and also for different
investment objectives such as short or long term investment, education, retirement,
general savings and others

1. Stocks or shares

What are they?

A stock or share represents a unit of ownership in a company. A stock can be
purchased by anyone above the age of 18 in blocks of 100 units, the minimum
number of shares you have to buy should you decide to invest. Shares are traded on
the stock exchange and anyone who owns shares in a company is known as a
shareholder.

How do I invest in them?

There are two ways to buy shares directly:

1. Through an initial public offering (IPO)

2. Through shares that are already traded on the exchange

You can also invest in shares through a fund manager or a unit trust fund, or where
you are an existing shareholder, through a rights issue or other corporate exercises.

How can I gain from my investment?

You can make money through growth in the value of the company by selling the
company’s shares at a higher price than when you bought them. As a shareholder,
you may also benefit from the profit earned by the company in the form of dividends.

How do I know which of them to buy?

Conducting research before investing in shares is important as there are risks
involved. You can find out about a company through reading documents like their
annual report, prospectus or even analyst reports about the company.
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Information in these documents will tell you about the company’s basic information,
what business activities it is engaged in, its plans for the future, the board of
management’s experience and expertise in running the business etc. Another key
element to consider is the general economic outlook.

Most importantly, you need to further ensure that the risks and returns associated
with the shares you want to invest in match your investment objectives and risk
profile.

What are some of my responsibilities as an investor?

 First - Understand the main business activity of the company

 Second - Monitor your investment by looking out for information on the
company such as its annual reports, financial statements and company
announcements both on the exchange as well as the media
 Third - Attend shareholders’ meetings and exercise your voting rights

Quick Checklist - How to Invest

 Must be above 18 years old to invest

 Open a CDS, eDividend account and share trading account with a licensed
dealer/remisier. Check the list of licensed dealers on Securities Commission
Malaysia (SC) website.
 Get information on the stocks you wish to invest in Start trading through the
licensed remisier concerned

2. Bonds or sukuk
What are they?
Bonds are long term debt securities offered by companies or governments (the
issuer) to investors to meet their financing needs.

Sukuk is a financing instrument for the purpose of raising funds by companies or

governments (issuer) and the underlying transaction is structured based on various
Shariah principles/contracts.

How do I invest in them?

Traditionally retail bonds and sukuk have a high face value, making it quite expensive
for retail investors. However, recently retail bonds and sukuk were developed to
enable greater retail participation.
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Retail bonds and sukuk may be issued and traded either on the exchange (Bursa
Malaysia) or over-the-counter (OTC) via appointed banks.

How can I gain from my investment?

Bondholders are entitled to receive interest at a fixed rate, normally referred to as
coupon payments, at predefined intervals. Upon maturity, the principal amount will be
returned to the bond holder.

Sukuk holders receive profit/income from the underlying assets which are distributed
at pre-determined intervals as well as any amount due upon maturity of the sukuk.

How do I know which of them to buy?

As an investor you should not make a decision to invest unless you have read and
understood the prospectus. The prospectus is an important document as it contains
important information on the bonds or sukuk issued to you, including the principal
terms and conditions and risk factors related to the issuance.

There are a few factors to consider when selecting a bond or sukuk, such as:

1. Rating - Measures the investment quality or grade of the bond or sukuk

2. Length of maturity - The tenure of the bond or sukuk before it matures
3. Risks

1. Credit risk - is the risk that the issuer will default, meaning that the
bond/sukuk issuer is unable to make the coupon/profit payments due
under the bond/sukuk and pay back the principal amount/capital upon
maturity. Government ETBS/sukuk are backed by the central
government, and thus are deemed to have a low credit risk.
2. Market risk - For bonds, this is the risk of price fluctuations due to
changes in interest rates as well as demand and supply of bonds in
the market.For sukuks, market risk refers to the possibility that income
and/or capital loss will occur because a change in the level of interest
rates consequently affects the price of the sukuk. This occurs as the
profit rates are benchmarked against the interest rates.
3. Tax status - In Malaysia, there is a tax exemption on profit/income
earned by individuals investing in sukuk.
4. Yield to maturity - It takes into account the current profit/income that
the bondholders/sukuk holders will get by holding the bond/sukuk to
maturity.
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What are some of my responsibilities as an investor?
As a bondholder or sukuk holder, you should be proactive in monitoring your
investment. Information on bonds and sukuks that you have invested in can be
accessed through Bursa Malaysia's website, banks from which they were purchased,
media announcements that may be made from time to time, and any other platform
as may be designated by the SC.

Where the issuer is a public listed company, you may also find more detailed
information on Bursa Malaysia (www.bursamalaysia.com) and on the company's
website.

3. Unit trust funds

What are they?

Unit trust funds (UTs) are a form of collective investment that allows investors with
similar investment objectives to pool their monies and invest them in a portfolio of
investments. This portfolio may include shares, bonds and derivatives. UTs are
managed by licensed fund managers who seek to achieve the investment objective
of a UT within the requirements of securities laws.

How do I invest in them?

A unit trust management company (UTMC) can distribute its unit trust funds directly
or through various channels such as institutional unit trust agents (IUTAs). Both
UTMCs and IUTAs will use employees or agents called unit trust consultants (UTCs)
who are registered with the Federation of Investment Managers Malaysia (FIMM) to
market and distribute unit trust funds.

A registered UTC must produce an authorisation card when approaching a potential

client.

How can I gain from my investment?

The return on investment for unit trust fund holders is usually in the form of income
distribution and/or capital appreciation, derived from the portfolio of investments the
unit trust fund.

How do I know which of them to buy?

There are many different unit trust funds that you can invest in, each seeking to
achieve different investment objectives via different investment strategies and
portfolios of investments.
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It is important to choose a fund that suits your investment goals and risk profile when
investing in a unit trust fund. Do read the unit trust fund prospectus and if in doubt,
consult a professional adviser.

4. Structured warrants
What are they?

Structured warrants are warrants issued by a third-party financial institution such as

an investment bank, commercial bank or a broker. A structured warrant gives
investors the right (but not the obligation) to buy or sell an underlying financial
instrument at a specified price on or before its expiry date. The underlying
instruments can either be shares, exchange traded funds or indices. A structured
warrant would typically be settled or paid in cash but settlement may also be in the
form of a physical delivery of the underlying shares.

Structured warrants provide an alternative means of getting exposure to the

underlying instruments without having to pay for the full amount for the underlying
instruments. Structured warrants are listed and traded on the Structured Warrants
Board of Bursa Malaysia Securities Berhad.

Structured warrants are different from company warrants. A company warrant is

issued by a listed company over its own shares. The company warrant gives an
investor the right (but not the obligation) to subscribe for new ordinary shares in the
company at a specified price during a specified period of time.

Common types of structured warrants include:

1. Call warrants
An investor with a bullish outlook on an underlying instrument would seek to
buy a call warrant which gives him or her the opportunity to enjoy the upside
gains when the price of the underlying instrument goes up.
2. Put warrants
An investor with a bearish view of the underlying instrument would buy a put
warrant to allow him or her to gain from the downward movement of the
underlying instrument.

How do I invest in them?

You can invest through a broker via its dealer representative, for example a remisier,
or through the broker’s online portal.
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How can I gain from my investment in structured warrants?
Call warrant: The more the price of the underlying instrument moves upwards, the
greater the profit opportunity for the warrant investor as the profit derived from a call
warrant is the difference between the fixed exercise price and the actual price of the
underlying instrument upon maturity or on exercise date.

Put warrant: The more the price of the underlying instrument moves downwards, the
greater the profit opportunity as the warrant investor stands to gain from the
difference between the exercise price and the underlying price. As the underlying
price goes down, the profit potential increases.

How do I know which of them to buy?

Be clear about your investment objective and understand the product you are
considering to invest in. If you have difficulty understanding structured warrants, for
example, then they may not be a suitable investment instrument for you.

Before investing in warrants, investors should read the prospectus and term sheet of
the warrants and check for, amongst others, the following:

 details of the issuer;

 the warrant’s structure and underlying instruments;
 the terms and conditions of investing;
 the strike or exercise price and conversion ratio;
 the expiry date; and
 the risks attached to the warrant.

When investing in any warrants, the maximum amount at risk is your full investment
(plus transaction costs) in the warrants.

If you are not buying the warrant for the underlying instruments, sell it well before its
expiry when there is some level of return.

What are some of my responsibilities as an investor?

All warrants have a limited life span. Pay attention to the warrant’s time to maturity or
expiry date.

Continue tracking the warrant as well as the underlying instruments price and
compare this against the conversion ratio along with the exercise price.

Keep abreast of developments in the media, research reports and announcements

on the exchange relating to the warrants and the underlying instruments.
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How do I know which of them to buy?
Be clear about your investment objective and understand the product you are
considering to invest in. If you have difficulty understanding warrants, then they may
not be a suitable investment instrument for you.

Before investing in structured warrants, investors should read the prospectus and
term sheet of the warrants and check for:

 details of the issuer;

 the warrant’s structure and underlying assets;
 the terms and conditions of investing;
 the strike price and conversion ratio;
 the expiry date; and
 the risks attached to the warrant.

When investing in structured warrants, the maximum amount at risk is your full
investment (plus transaction costs) in the warrant. Consider whether it is cheaper to
sell the warrants and pick up shares from the market.

If you are not buying the warrant for the underlying share or assets, sell it well before
its expiry when there is a reasonable level of gain.

What are some of my responsibilities as an investor?

All warrants have a limited life span. Pay attention to the warrant’s time to maturity.

Continue tracking the warrant as well as the underlying share or asset price and
compare this against the conversion ratio along with the exercise price.

Keep abreast of developments in the media, research reports and announcements

on the exchange.

5. Private retirement schemes

What are they?

Private retirement schemes (PRSs) are voluntary long-term investment schemes

designed to help you accumulate savings for retirement. PRS seek to enhance
choices available for all Malaysians, whether employed or self-employed, to
voluntarily supplement their retirement savings in addition to mandatory contributions
made to the Employees Provident Fund (EPF).
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Each PRS offers a choice of retirement funds from which individuals may choose to
invest in based on their own retirement needs, goals and risk appetite. The fund
options under a PRS are intended to enhance long-term returns for members within a
regulated framework.

How do I invest in them?

To make contributions to PRSs, contact an approved PRS Provider listed on SC

website at https://www.sc.com.my/regulation/licensing/licensed-and-registered-
persons. At the same time you may open an account with the Private Pension
Administrator (PPA) account by completing an account opening form that can be
obtained from any PRS Provider.

Any individual who has attained the age of 18 may make a contribution to any fund
under the PRS. You will be given a lifetime account number and a password after
opening an account. You are advised to read and understand the Disclosure
Document and Product Highlights Sheet to understand the risks involved before
investing in a PRS. The list of PRS funds approved for sale with links to all the
disclosure documents can also be referred on SC’s website
at https://www.sc.com.my/analytics/fund-management-products/list-of-schemes-
approved-for-sale-for-private-retirement-scheme.

How do I know which of them to buy?

When considering which PRS to sign up with, you should take into account a few
critical factors such as your age, personal and household income, risk tolerance,
retirement objective as well as the suitability of the different funds under the various
schemes in meeting your retirement needs. Do also take note of the funds’ fees and
charges.

Did you know?

If you’re a Malaysian aged 20-30 who contributes at least RM1,000 to any PRS fund
within a calendar year between 2014 to 2018, you’ll receive a one-time Government
contribution of RM500 in the form of units into your PRS account.

Other factors to consider:

Retirement investment objectives:

 Growth – primary focus is to generate compounding and accelerating capital

growth by investing in equities
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 Growth & income – balanced requirement for compounding capital growth as
well as income by investing in mixed assets i.e. equities and bonds/fixed
income instruments
 Income – primary focus is to generate regular income stream by investing in
bonds/fixed income instruments

Retirement life stage:

 Less than 40 years , you may want to focus on capital growth

 Between 40-50 years, you may want to balance capital growth and income
 Above 50 years, you may want to focus on generating sustainable income

For investors that do not want to select a fund option by their PRS Provider, a default
option is available that would cater for the different age groups and you would be
automatically switched to the default funds in accordance with the relevant age group
as shown above.

Personal risk profile:

 Aggressive – you are able to withstand market volatility and capital losses
 Moderate – you are looking at balancing market risk and returns
 Conservative – you are unable to withstand capital losses