In total, 146 risk range products – aggressive, balanced, cautious and flexible – are available for sale to Singapore’s retail investors, according to FE data.
It’s an increasingly crowded field. In the past year, Aberdeen Standard, Capital Group, Nikko AM, UTI and Lion Global have all launched multi-asset risk range strategies that target Singapore’s retail investor base.
Fullerton, the former asset management unit of state-owned Temasek, now joins the pack with three mixed asset “Heritage” funds that address three risk levels – balanced, growth and income, designed as a complement to retirement plans.
Vincent Chan, head of the firm’s multi-asset team is the lead manager of the three funds, which invest in Asian credits, Singapore bonds, Asian stocks and Singapore REITs
Chan believes differentiation comes from a Singapore-centric investment strategy.
“[The funds] are defined by having at least 50% invested in Singapore assets, either in Singapore-denominated currency or equities,” he told FSA.
The income fund, however, which invests mainly in fixed income and targets investors about to leave the workforce, has nearly 100% in Singapore assets, he added.
“For investors, the older they are, the more comfortable with Singapore investment assets. I think it’s a home bias.”
Reaching scale
The fund series launched in May and in the initial stage, about one-third of the assets are invested in other Fullerton funds, Chan said. The firm waives the management fee for the underlying Fullerton funds in order to avoid layers of fees, he added.
The current annual management fees for the income, balanced and growth products are 0.80%, 0.88% and 0.98%, respectively, which Chan believes is competitive pricing.
“Once the fund size has grown to a sufficient level (over S$100m or $73.5m), it allows us to start buying individual securities, and we migrate the exposure into an external-owned managed account.”
Chan said the income product has already reached the sufficient level. The yield is expected to be 4%-4.5%. “The fund should be able to support a 5% payout from a combination of yield and capital gains,” he said.
He thinks the income strategy has quickly gathered assets due to the larger amount of savings held by older investors, who tend to prefer the more risk-averse product.
“Someone younger could have more risk appetite and choose the growth fund, which allows us to invest in a lot of growth opportunities beyond Singapore, represented in terms of high allocation of equity. It is a longer investment horizon”.
The products are distributed by Standard Chartered Bank. He acknowledges that the funds compete with the portfolios offered by independent wealth managers, who also provide portfolio services based on a client’s measured risk preference.
Risk level categorisation funds “are broadly prevalent in the wealth management industry”, he said. But he believes his firm’s products are differentiated by risk management.
The manager has the flexibility to add a contrarian position “when the market goes too extreme”, Chan said.
