The Employees Provident Fund (EPF) has told unit trust companies to stop misleading advertisements that compare returns between unit trusts and the EPF.

The EPF has already warned one company to withdraw its advertisement and is monitoring others which make unfair claims that investments in unit trusts gave better returns.

Its deputy chief executive officer Rusma Ibrahim said the advertisement was misleading.

“In this particular case, the returns to the unit trust fund was highlighted instead of the returns to the individual investor,” she said.

A leaflet sent to The Star claimed that an investment of RM30,000 (US$7,897) in a unit trust earned five times more than it would have from the EPF.

Rusma urged the 10.5 million EPF contributors to understand how unit trusts work and when to invest and divest to get the best returns.

She said the EPF had a scheme that enabled members to enhance their retirement asset by investing in unit trusts through approved fund managers.

“Investments in unit trusts may bring better returns than the EPF’s if members know how to manage the investments.

“However, if members do not understand unit trusts, it may be more prudent for them to leave the funds in the EPF and earn reasonable returns via dividends,” she added.

Her comments came in the wake of The Star’s investigations into losses sustained by some investors in unit trusts in contrast to promises of lucrative returns in such investments.

Rusma said a potential investor in unit trusts should be fully conversant with the risks associated with such investments, instead of being lured by promises of quick and attractive returns.

In two recent cases reported to the EPF, a contributor suffered losses when his RM200,000 (US$52,647) investment two years ago turned sour; he got back only RM160,000 (US$42,117) upon liquidation.

The second case involves an investment of RM10,000 (US$2,632) made in 1999. The investor recently liquidated and got back only RM9,300 (US$2,448).

In another case, a unit trust agent sent out leaflets claiming that those investing in certain funds could reap a 12% dividend, compared with 5% from the EPF.

In an illustration, the leaflet stated that RM30,000 (US$7,897) with a dividend of 5% would grow to RM101,591 (US$26,742) after 25 years. The same amount invested in a unit trust at a dividend rate of 12% for 25 years would grow to RM510,202 (US$134,303) – five times higher.

Last year was a bumper year for the Malaysian unit trust industry. At the end of the year RM87.4 billion (US$23 billion) had been invested by 10.4 million unit trust account holders.

Between January and March, 47,000 withdrawals totalling RM482mil (US$126.9 million) were made from the EPF’s Account One for unit trust investments.