Aug 05 2009
MyHome Fund Launched by POSB
POSB yesterday announced the launch of MyHome Fund, a fund that allows investors to gain exposure to Singapore bonds and equities by investing into two Exchange Traded Funds (ETFs) – DBS Singapore STI ETF and ABF Singapore Bond Index Fund.
MyHomeFund is a mid to long term investment and there are currently two portfolios to choose from:
- HomeSteady which has a 80% allocation to ABF Singapore Bond Index and 20% allocation to DBS Singapore STI ETF
- HomeBalanced which has a 50% allocation to ABF Singapore Bond Index and 50% allocation to DBS Singapore STI ETF
The newspapers reported another Growth portfolio with a 80% equity – 20% bond allocation but I couldn’t find it in the announcement or the product brochure. Perhaps the Growth portfolio has been postponed.
Investments into MyHome Fund starts from a minimum of $1000. The initial sales charge is 3% (ST incorrectly reported it as 0.3%) and there is an annual management fee of 0.5%. Application can be done using cash or SRS via POSB branches, ATMs or internet banking.
The MyHome Fund could be an option for investors who wants to invest passively into the Singapore market on a regular basis.
The pre-defined allocation percentages means that you do not even have to bother about rebalancing the portfolio yourself. This is something that you would need to do if you were to construct your own ETF portfolio by buying the ETFs directly.
The fact that DBS is the manager of DSB STI ETF also means that there could be cost savings when it invests into the STI ETF.
With ETFs gaining popularity over traditional Unit Trust because of their low cost structure, I will not be surprised to see the launch of more low cost passively managed funds that uses ETFs as their investment vehicles.
This is good news for the retail investor. Personally, I would also like to see more low cost index funds being bought to the Singapore market. An index fund that charges you 0.5% p.a. that tracks the STI would likely to be more cost effective than one that charges you 0.5% p.a. to buy into a STI ETF (which charges you another layer of fees).
The options for that are rather limited now.
The brochure for MyHomeFund can be downloaded here:
This is a joke.
if u buy the ETF on your own, u do not need to pay POSB the 0.5% Mgt fee!
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lioninvestor Reply:
August 6th, 2009 at 7:09 am
Yes, but you do not need to incur any cost for portfolio rebalancing.
Also, if you want to do a regular monthly investment of say $100 to $1000, the upfront cost will actually be lower.
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The initial sales charge is 3% (ST incorrectly reported it as 0.3%)
The critic in me is wondering, whether the error is intentional, since both ST and POSB are owned by the same entity, as in majority shares.
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lioninvestor Reply:
August 6th, 2009 at 10:53 am
I am sure it is an honest mistake.
It seemed too good to be true (the 0.3%) but for a moment, I actually hoped it was correctly reported.
Investors can celebrate if it was really 0.3%. lol
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well.. if i bought both ETFs using online broker.. it will only cost 0.28% one-way!
less if i use dbs vickers (upfront cash payment).
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lioninvestor Reply:
August 6th, 2009 at 8:58 pm
Yes, but if someone were to invest say $1k, the commission will still come up to about 3%. Not to mention the bid-offer spread which is also inherent in the ETF pricing.
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I buy streetTRACKS STI ETF directly, I buy less then 0.3 % fee and receive 4 to 6 % annual dividend. The ETF have been paying about 5% dividend since 2002.
There is no record of dividend for DBS STI ETF and no promise from DBS/POSB for paying any dividend for the new funds! And, they want to charge 0.5 % annual management fee for these low maintanance funds.
ETFs are already well diversified. The rebalancing between two ETFs is not that important.
What is you take? “0.3% fee plus 5% dividend” or ” 3% sale charge + 0.5% annual fee + rebalancing benefit and no promise for dividend”.
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lioninvestor Reply:
August 6th, 2009 at 9:02 pm
Hi Coffee-o,
Actually, the dividends for the myhome fund isn’t that important whether they pay it out or not as the money will still belong to the investor (in the form of higher NAV).
The 0.275% brokerage fee only applies if you are investing 9k or above due to the $25 minimum.
The rebalancing between different asset class might be able to give a performance boost beyond the 0.5% it charges but of course you can always do it yourself.
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lion.. i am sure the fund charges you bid-ask spread when you invest in the mother fund.
for example, you buy 1k of mother fund. When mother fund buys 50% into STI ETF and 50% in ABF ETF.. they will be using ASK price as well.
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lioninvestor Reply:
August 7th, 2009 at 7:15 am
If the amount is huge enough, the fund can get the ETF providers to create units at NAV.
This would be more so for the STI ETF since they own it.
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lion.. i think what coffee-o is saying is the underlyings (DBS STI ETF and ABF Bond fund) don’t appear to pay out dividends.
so unless DBS STI ETF is a cum-dividend priced fund (i am not sure it is), coffee-o is saying he’s better off buying streettracks etf fund which pays out regular dividends.
This is provided streettracks etf fund and dbs sti etf have same navs.
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lioninvestor Reply:
August 7th, 2009 at 7:27 am
Hi intheknow,
Yes, but the NAV won’t be the same because it’s derived from the underlying assets.
If 2 funds invest in the exact same shares and 1 pays out the dividends it collects while the other does not, the one that does not will see it’s NAV increase more over time since the dividends it collects will go into the fund (unless the fund stipulates it collects the dividends as fees).
In any case, both DBS STI ETF and ABF Bond fund aims to pay out dividends which will go to the myhome fund.
If myhome fund does not pay out any dividends, the investor can always create that effect by selling units periodically if he wants regular income.
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long story short.. this is a thumbs down fund.
why should investors pay anything for nothing.
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Intheknow – Well Say.
Lion – please try not to oversell this fund for the benefits of the man-in-the-street. There are many people need regular income from dividend and lock in profit.
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lioninvestor Reply:
August 7th, 2009 at 7:17 am
Hi coffee-o,
what I’m trying to say is that this fund could be a viable option for the small investor.
Say someone who wants to invest $100/month.
Compared to other unit trusts out there, it’s a cheaper option.
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[...] don’t understand why there is even a need to pay an initial 3% of sales charge (not 0.3% as reported in newspapers) and annual management fee of 0.5% when you may as well directly buy into the Singapore government [...]
wiseinvestor… good article..
I FULLY AGREE WITH YOU.
thumbs down to this fund.
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Why POSB combine DBS STI ETF and ABF Singapore Bond ETF to launch MyHome Funds??
They are two new ETFs managed by DBS.
They are listed in SGX, their treading volumns are very very low.
DBS STI ETF (abt $2.620) has yet paid any dividend.
Dividend ??
ABF SPORE BOND INDEX FUND ETF (abt $1.085) has paid following dividends:
Oct 2008 SGD 0.01
Oct 2007 SGD 0.01
Oct 2006 SGD 0.015 >>>> Dividend is about 0.9 to 1.5 % pa
(Any Singapore Gov Bond can pay better then that)
What will be the performance of My Home Funds??
What will be the dividend of My Home Funds if there is any??
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the brochure was silent on what happens to the dividends, if any, paid out by the ETFs.
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I heard from a source within DBS Asset management that there is no management fee rebates from DBS STI ETF back to MyHome Fund. They pocket it twice. For a fund which invested into a mother fund managed by the same asset manager, that is the market practice.
Can’t find evidence of this except to track the prices of STI, DBS STI ETF and MyHome Fund. Lion, you have any ideas on how to check on this point?
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lioninvestor Reply:
August 16th, 2009 at 7:56 pm
Hi Cloud,
It was reported by Lorna Tan in today’s Sunday Times that the management fees would be rebated, so she must have gotten it from somewhere.
It can be easily verified by going through the prospectus.
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lioninvestor Reply:
August 25th, 2009 at 2:26 am
Hi Cloud,
There was a public response in The Edge by DBSAM that there will be no double charging of management fees. The investor will only be hit with one layer of charge.
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a fund’s NAV is quite untransparent. how do you know they didn’t actually double charge management fees?
let’s wait and see if MyHome’s NAV would be exactly:
x% of DBS STI ETF + y% of DBS Bond Fund.
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I still prefer to invest in STI ETF through POEMS ShareBuilder Plan, for monthly amount between 600-1000, only costs about $6.42, so it’s about or less than 1%. Not good if you want to invest only 100-200 though. I think POEMS doesn’t really earn lot of money from this, that’s why it hardly appears in ads.
I would like to see other lower cost fund emerged based on ETF too.
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