Mutual funds are collective investment schemes that pool money from investors and use the proceeds from funds raised to invest in various investment securities, like stocks and bonds. Mutual funds are open to retail investors and the fund prospectus spells out the mutual funds’ investment objective and universe of securities that they are mandated to invest in.
In Singapore, many local bank backed asset managers and global asset managers offer mutual funds with differing investment profiles. Mutual funds offer investor means of diversification as huge sums are pooled by investors. Investors can subscribe and redeem units for a mutual fund at net asset value which is priced daily. Investors looking to invest in mutual funds can opt to invest through online platforms like Fundsupermart or look for adviser assisted platforms like iFast Global Markets.
In fact, with the growing economic strength across global markets and industries in 2017, the iFast Research Team predicts corporate earnings to continue its growth trajectory into 2018, led by Asian ex-Japan equities. At the same time, they also believe that developed markets would still be necessary for portfolio diversification though they remain underweight on the region.
Here is a selection of mutual funds available for investment in Singapore for 2018 that investors should pay attention to, which we’ve handpicked based on the investment merits of each country. In fact, we included some Japan funds, just in case that’s your jam.
|Country Focus||Singapore Unit Trust||5 year annualized return|
|Singapore||Aberdeen Select Portfolio-Aberdeen Singapore Equity Fund – SGD||4.71%|
|Singapore||Nikko AM Shenton Singapore Dividend Equity Fund – SGD Class||6.37%|
|Japan||LionGlobal Japan Growth Fund – SGD Class||15.00%|
|Japan||Nikko AM Shenton Japan Fund – SGD Class||13.00%|
|US||Aberdeen Select Portfolio-Aberdeen American Opportunities Fund – SGD||11.00%|
|US||Legg Mason ClearBridge Value Fund Class A SGD Accumulating||12.00%|
|China||Schroder China Opportunities SGD||13.00%|
|China||UOB United Greater China Fund||12.00%|
Singapore, following an outstanding 2017 3.3% economic growth, would very likely continue its uptrend of clocking another 3% GDP growth for 2018, based on a survey by economists and analysts. Manufacturing, finance and insurance and private consumption is forecasted to performed reasonably well to contribute to the target growth rate for 2018. With oil and gas sector recovering, property sector upswing mode underway and continued low unemployment rate hovering at lows of 2.2%, Singapore’s solid forecasted 2018 economy would translate into higher earnings enjoyed by Singapore companies and public listed stocks.
To get exposure on Singapore’s economic expansion, investors can acquire units in equity mutual funds that mandates investing in Singapore public listed companies. Investors could look into purchasing Aberdeen Select Portfolio-Aberdeen Singapore Equity Fund – SGD. It is a CPF Ordinary Account approved unit trust fund with a 4 star Morningstar rating as of February 2018. It was also awarded the Best Equity Singapore Fund Over 10 years, by Thomson Reuters Lipper for its 2017 Fund Award, a testament to its solid 9.3% annualized returns chalked up over its 20 year operation. Investors can get instant diversification into Singapore listed heavyweights and blue chip companies such as OCBC, DBS and Singtel in a cost efficient manner. Investors’ capital is well taken care of should they wish to have full exposure into Singapore listed equities.
Investors looking at adding Singapore stocks exposure can consider accumulating units in Nikko AM Shenton Singapore Dividend Equity Fund – SGD Class into their mutual funds portfolio. Established in 1999, this fund is still running strong after almost 20 years with a commendable 5 year annualized 6.37% CAGR returns. The fund mainly invests in Singapore SGX listed equities, with opportunistic allocations to stocks outside of Singapore. It has a mixed bag of blue chips companies such as DBS Bank, OCBC Bank and Venture Corp Ltd, giving investors a well-diversified portfolio scattered across industries ranging from Financials to high end manufacturing. Investors can enjoy the benefits of consistent dividends from its portfolio companies.
Japanese economy is forecasted to do well into much of 2018, as recent exports indicator shows which grew 12%. A resurgence of Japan’s economy coupled with loose monetary policy has powered businesses to invest. Labour markets remain strong with unemployment rates hovering at around 3%, and economists are all sanguine about the economic prospects for 2018.
Japanese equities would no doubt continue to perform well on the rise of corporate earnings, and investors can take advantage of mutual funds focused on Japan’s corporate sector. One such fund that should be in investor’s portfolio for 2018 is LionGlobal Japan Growth Fund – SGD Class. Armed with a 4-star rating from mutual fund analyst Morningstar, the fund notched an impressive 15% 5 year annualized returns and has been trading since 1999. This Fund purely invests 100% of its proceeds in Japan, has flexibility in choosing in targeted industries in Japan for investment and aims to provide unitholders long term capital growth. Among its top holdings include Orix Corporation, Chiba Bank and Sony Corporation.
Another Japanese focused fund with long historical track record is the Nikko AM Shenton Japan Fund – SGD Class. Its 5 year annualized returns stood at an impressive 13%, continuing to reward investors via capital growth since 1987. The fund focuses on Japanese large market capitalized stocks, with top holdings in public listed corporations known widely such as Sony Corporation, entertainment powerhouse Nintendo Co. Ltd, Toyota Motor Corporation and financial heavyweight Mitsubishi UFJ Financial Group Inc. The fund is equally balances by sector among technology, industrials, financial services and consumer sectors, giving investors the best possible Japan focused equity fund.
U.S. economic prosperity for much of 2017 has captured headlines around the world and lifted US equities. Further growth is anticipated by economists where projected 2018 growth is fixated around 3%. U.S. tax overhaul involving cutting corporate tax rate would stimulate the economy for 2018. Monetary policy has been closely watched and a faster pace of interest rate hikes by US Federal Reserve has sparked a global equties selloff in early February 2018. However, equity markets had since stabilized and recovered strongly and the dip has presented opportunities for cash rich investors to accumulate fundamentally strong US based companies.
Investors locally could participate in the vibrancy of US economy via unit trust funds investing in US corporations. Equities remain the best asset class to compound wealth over longer term. One well managed mutual fund 2018 that investors can look to accumulate is Aberdeen Select Portfolio-Aberdeen American Opportunities Fund – SGD. 5 year annualized returns of 11% makes for a decent track record on this US specialized equity fund. It is in fact a fund of funds, investing its proceeds into Aberdeen Global – North American Equity Fund A Acc USD where underlying investment portfolio includes Visa Inc, Amazon.com Inc, Alphabet and Microsoft.
Investor can also look into Legg Mason ClearBridge Value Fund Class A SGD Accumulating fund, with 5 year trailing annualized returns at 12%. The Fund holds position in US Large cap equities, cream of the American listed corporations such as Alphabet Inc and Well Fargo & Co. Its portfolio is well diversified by sectors among them technology, industrials, healthcare and financial services. The 2 star rated unit trust fund by Morningstar could serve investors well with US economy powering well into 2018.
Last but not least, Chinese economy has not seen as much glowing coverage as the US economy but could grow another 6.5% in 2018. Pollution crackdown and real estate lending restriction measures have been put in place to ensure economy is on track for sustainable growth going forward. External trade is forecasted to perform well in 2018 as US economy gather momentum.
Leading the pack in terms of China mutual fund play is Schroder China Opportunities SGD Fund managed by Schroders, an investment powerhouse based in the UK. China’s growth as the world’s second largest economy behind US is no accident where it is the culmination of government planning and single pursuit of economic advancement for the betterment of its citizens. It is an equity-based Fund of Funds where its underlying fund is Schroder ISF China Opportunities. The China focused mutual fund has Alibaba, Tencent and Ping An Insurance as part of its top 10 holdings. It NAV has grown at a annualized 5 year returns of 13%. Investors looking to diversify their portfolio into China can consider the professional management of Schroders team backed by a solid track record. Investors’ direct holdings in the mutual fund units are in SGD, hence are spared of foreign currency risks.
Another China based mutual fund for 2018 that would make a great addition to investor’s portfolio is UOB United Greater China Fund. Its 5 year annualized returns stands at 12%, contributed by global Chinese giants Alibaba, Tencent, China Mobile and AIA Group. The companies operate in wide ranging industries with the majority in technology and financial services.
How should you evaluate a fund?
TJ Tan, CFA, from DCG Capital gave ZUU online a unique view on this, based on the 5 Aces list mooted by Peter Kaufman, during the Daily Journal annual meeting in February. Tan explains that five aces is the highest hand you can have in a wild card poker game. Here’s what they mean.
Ace 1: Total Integrity (Are the funds run by managers who have integrity?)
Ace 2: Fluency (Are the fund managers proficient in what they do?)
Ace 3: Fair Fee Structure (Is the fee structure fair to both the manager and the client?)
Ace 4: An uncrowded investment space (Is the fund doing something that others are also doing? Margins would be narrower in that space)
Ace 5: A Long Investment Runway (The fund manager should reasonably young and able to stick around for a long time)
“More importantly, these are the same 5 aspirations we try to possess as we organise and run our daily fund management operations,” quips Tan. DCG Capital manages the DCG Asia Value Fund, which invests in publicly listed companies in Asia, ex-Japan, based on a value investing approach. Find out more about the fund here.
Are there other considerations that they think matter in evaluating funds?
“An alignment of interest,” says Tan. “Is the manager an employee or an owner? Is the wealth of the manager tied to the performance of the fund? Is the manager motivated to continue in this position or will he just jump to the next higher paying job? Also, most importantly, are the promised returns too good to be true?”
(By Chee Hoong Chan)
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