FSM INVEST EXPO 2020
Asked 6d ago
The global trend is moving towards no-fee or low fee investing, yet Singapore is still upholding its high fee structure for unit trusts and funds. Singapore is supposed to be the financial hub and we should be the first mover in such huge global trends. Why not?
Top Contributor (Dec)
Can I understand what you mean by high fees?
Transactionally, you can find zero sales charge, zero platform fees and zero switching fees solution here.
If you're talking about management fees, remember that ETFs have management fees as well, although they are lower than UTs in general, but never forget the job scope of the ETF manager is basically to buy holdings that replicate the ETF.....and that's it....
A UT manager does not just buy holdings based off a benchmark, but their goal is and always has been to deliver market beating returns, which again, not all UTs can do. They do have a team of analysts and the like to support the operation, so that has to be costed in somewhere. After all, if you are trying to beat the benchmark, then you can't just buy the benchmark, you need to adjust the allocation, and maybe even buy stuff not on the benchmark due to your research and convinction.
Now, as Jonathan mentioned, the real question is whether the manager is worth the fee.
If he's delivering market beating returns nett of fees, do you really care about what he charges? A high fee would erode his returns to below market returns anyway, so it is also in their interest that the fees be reflective of the costs to run the fund.
As an example, I will point you to First State Dividend Advantage, which has, nett of fees, beaten MSCI AP ex-Japan handily. (Usual disclaimer of past performance not representative of future results). However do note that not all funds perform like this fund does. There are quite a number of funds out there that just can't deliver the Alpha returns. Well, no one said you had to invest in those fund right?
I could say a lot more, but I'm not about to turn this into an essay, got a feeling my answer is already longer than all other 8 answers (as of this point of writing) combined.
Now, before the naysayers and protesters come in, please, civil discussion only.
Easier to earn money from fees than investment returns
I think this is also a question of scale. You can offer 0.03% if u manage 7 trillion USD of assets, but SG being quite small, funds not be able to gather enough assets to lower the fees to an equivalent amount. At the end of the day, expenses for the fund company need to be paid. For example, even an AUM of 1 billion SGD, only generates 300,000 SGD of revenue at 0.03%. But 1.5% generates just enough to pay the expenses and turn a small profit
I would think that the fees are to pay the fund/trust manager, for their efforts. I Guess the fact that we are a small little dot also gives the restriction of a high competitive environment.
It's not just fund houses marketing unit trusts that charge high fees. Hedge funds charge high (usually higher) fees as well.
You pay for expertise and their experience plus cost of distribution as mentioned by other here. Whether these fees are justifiable are subjective.
I reckon the fee is set in place by regulatory bodies in Singapore i.e. MAS, similar to broker commissions, why can't CDP-based accounts break the minimum limit of $25 when stock brokers like Robin Hood (only available in the US) provides zero-dollar commission rates to purchase equitites. And well, I guess fund managers need to have an income as well hahaha
It depends on your investment objective and what you are after. Active management is a cost. And the ability to react to the market in a timely manner may be important during a crisis.
Here is everything about me and what I do best.
We need to pay 6 figure salariesto hire fund mangers and accountants as well as the high rental cost of grade A office.
This is why passive funds perform better because nett off the cost of an excel, passive funds end up performing better than active (who has a high cost base)
Top Contributor (Dec)
Active management costs money. Distribution costs money.
If you want active management and advice, you have to pay for it.
If not, DIY and buy passive index trackers or individual securities.