Latest Fixed Payout Fund by SG not so attractive afterall

[Dennis Ng]

A friend asked me to comment on this latest "Fixed Payout Fund" launched by SG Asset Management.

Here's sharing for everyone's benefit info about the fund and my comments.

Cheers!

Dennis Ng

SG ASSET MANAGEMENT LAUNCHES FIXED PAYOUT FUND
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Also comes with 'minimum floor' price to limit capital losses

A new fund that guarantees a fixed payout of 4.8 cents per unit every year
has been launched by SG Asset Management (SGAM).

The Bonus Builder Fund pays 1.2 cents every quarter, but this applies only
to investors who hold their investments until the relevant payout date.
The first quarterly payout would be made in December 2005.

The open-ended fund also offers some protection to a unit-holder's
capital. Everyday, a "minimum floor" is calculated at 80 per cent of the
highest net asset value (NAV) per unit achieved over the past 12 months.
Investors will redeem units at the minimum floor value or the prevailing
NAV per unit, whichever is higher.

Besides a steady stream of income, the fund will provide capital growth
through participation in 5 stock indices in Asia, namely those in Japan,
Hong Kong, Australia, Taiwan and South Korea.

"The fund will have less volatility than direct investments into these
indices," said Mr Frederic Barroyer, chief executive officer of SGAM
Singapore.

French bank Societe Generale is the guarantor for the fixed payouts and
the minimum floor price. The fund charges an upfront fee of 3 per cent and
an annual management fee of 1.3 per cent.

The offer price of the SGAM Bonus Builder Fund during its initial offer
period is $1.00 per unit. The offer period ends on Nov 30. Applications
for the units may be made through distributors such as ABN Amro, Hong
Leong Finance, Amex, RHB and online investment portals. The minimum
investment outlay is $1,000 while the minimum subsequent subscription is
$500, during and after the offer period.

My comments:

1. Firstly, after the various ?gimmicky? but disappointing launches by SG, I would now take every product from SG with a few pinches of salt.

2. Note, the dividend given might actually be partly from the NAV. So anyone thinking his initial investment is kept preserved plus dividend is not actually reading the info correctly.

3. The min floor is calculated at 80% of highest NAV achieved over last 12 months?.the Highest NAV can actually be less than $1 (launch price)..so what?s so comforting about that. Read the clause below again:


Everyday, a "minimum floor" is calculated at 80 per cent of the
highest net asset value (NAV) per unit achieved over the past 12 months.
Investors will redeem units at the minimum floor value or the prevailing
NAV per unit, whichever is higher.

4. To me, an article like that without trying to help readers decipher what?s being said by the Asset Mgt firm is a zero value-add article, seem like just helping them to advertise.

5. SG is a little ?passe? A good asset management co with some ?foresight? should be launching ?Tech fund? or ?Growth fund? now not a ?dividend fund? since a lot of dividend stock prices already rose a lot?.while you can find tech stock and growth stock at a bargain right now.

6. Anyway, it shows that Financial Institutions just like to give investors ?what they want even if they want poison??.rather than putting their clients? interest first and launch product that make more investment sense. (of course I?m sure feedback from distributors eg. Banks actually crave for dividend products now) just like Banks like to push Capital Guaranteed Fund after market crash (huh?) and push Tech fund when Nasdaq was above 4,00 (despite Nasdaq went up like crazy from 2,500 to over 4,000 level in 6 months? time).

7. To me, how much money I make is not the Key, the key is how I make the money. I would only make money with a clear conscience with my clients? interest in mind.

8. Last year, those people lapping up more than S$300 million of G22 (or otherwise known as Durian distributed by DBS manufactured by AVIVA) which gives annual returns of 2.5% but need to lock in for 8 years) must be now kicking themselves since anyone can get 2.45% returns from E-saver (no lock-in period) from Standard Chartered now. Ouch, that?s a "fee" they pay without someone like me giving them a 2nd opinion.