Malaysia's fledgling unit trust industry is projected to grow from its current base of RM40 billion in managed funds to over RM250 billion by 2010, as the country's maturing population opts for more efficient savings instruments, an industry player said.

Over the next two years, the industry is expected to see its managed funds rising to RM60 billion.

Commerce Trust Bhd chief executive officer Yeoh Keat Seng said the unit trust industry's net asset value (NAV) makes up about 10 per cent of the market capitalisation of stocks traded on the Kuala Lumpur Stock Exchange, compared with a penetration rate of 15 to 40 per cent in more advanced economies.

Yeoh, who expects to see a sharp growth trajectory for the industry over the next decade, said the ratio of the industry's NAV to market capitalisation would only be 21 per cent by 2010, despite having grown in leaps and bounds.

He expects to see a sizeable jump in growth to RM60 billion in managed funds within the next two years, due to expectations of a market recovery on the back of an economic turnaround next year.

The industry's rapid growth would be mainly due to a rising matured investing population that would increasingly accept unit trusts as a mainstream savings and investment tool, as well as the country's high savings rate that could be tapped for unit trust investing.

"Large chunks of discretionary savings are kept in fixed deposits, which are not efficient savings instruments due to low inflation-adjusted returns," Yeoh said, forecasting that more consumers are likely to switch from fixed deposits to unit trusts, as is the trend in more developed economies.

However, to achieve the projected growth, Yeoh said the industry has to continue improving its product range, increase its distribution channels and educate the public on the merits of investing in unit trusts as well as ensure that it avoids the pitfalls of scandals and collapses that have been seen in other countries.