Homepage
PR Newswire
29-07-2019, 08:51 AM
The current market for investments for the 'emerging affluent' -- those who do not belong to AI category, but has large investable assets, say $500k -- is roughly as such:
1. Fixed / Structured Deposits
2. Exchange Traded Funds based on a particular (equity/bond market) Index
3. Unit Trust (active/passive managed, equity/bond portfolio)
4. Insurance with Participating Fund (whole life/endowment)
5. Robo / AI-managed portfolio of equity/bond ETFs
6. Exchange Traded Stocks
I have left out property due to the restrictive regulations on ownership of an investment property.
===
An investor who wishes to get higher returns than 1-2% p.a., but who does not wish to enter the stock/property market, will be largely restricted to options 2-5.
While these options may look like different choices to investors, they are largely quite similar in character and returns. The index-hugging behaviour of so-called actively-managed Unit Trusts make them no different from ETF, except with higher fees for the active management. For Par Fund Insurance, their underlying is either their in-house Unit Trust or ETFs. They generate slightly lower returns than UTs/ETFs because of the added cost of agent sales commission and insurance. As for Robo, the underlying are ETFs, except that there is some supposedly superior algorithm actively managing your portfolio.
Hence, choosing anything from option 2-5 will at best only yield market-average (i.e. index) returns, with lower returns for those with added services such as agent servicing, insurance, and active management. While investing in any of these products may yield very good returns (say, more than 20% p.a.) on particular years -- such as equities between 2005-2007 -- they are the exception rather than the norm. The norm -- the longer-term average -- is something like 3-5% p.a.. Even then, most may not even get such returns due to the investor's inability to stomach volatility, or just wait patiently.
So how? Fixed deposits too low, structured deposits too long, property too restrictive, and ETF/UT/Insurance/Robo does not deliver stable/predictable/good returns. I want to make a killing. But the equity markets looks even more risky, and I know next to nothing. So how?
In the past, return-hungry investors had the choice of land banking, oil pods, time-share, gold buy-backs, and so on.
But the public has since become (slightly) smarter. They are now less likely to fall for your 'high-return investments,' perhaps at least for the time being.
So how does the market satisfy these return-hungry, non-AI-but-quite-rich, and more savvy, investors?
===
I agree that the purpose of only allowing AI to subscribe to boutique funds are meant to protect the non-AI. But by 'protecting' the non-AI, they are made vulnerable to 'investment education' salesmen. Besides, the volatility of most long-only boutique funds does not differ too much from their benchmark indices.
So I think MAS should move towards allows for the non-AI-but-quite-rich segment to be more adequately served, preferably with more access to those services available to AI. Perhaps MAS' rationale is that these group of people are already adequately served by the wealth management units of big banks. Perhaps to protect the non-AI-but-quite-rich market of these big banks.
My opinion is that the market for investment needs to be freer to reduce 'waste' and enhance competitiveness.
1. Fixed / Structured Deposits
2. Exchange Traded Funds based on a particular (equity/bond market) Index
3. Unit Trust (active/passive managed, equity/bond portfolio)
4. Insurance with Participating Fund (whole life/endowment)
5. Robo / AI-managed portfolio of equity/bond ETFs
6. Exchange Traded Stocks
I have left out property due to the restrictive regulations on ownership of an investment property.
===
An investor who wishes to get higher returns than 1-2% p.a., but who does not wish to enter the stock/property market, will be largely restricted to options 2-5.
While these options may look like different choices to investors, they are largely quite similar in character and returns. The index-hugging behaviour of so-called actively-managed Unit Trusts make them no different from ETF, except with higher fees for the active management. For Par Fund Insurance, their underlying is either their in-house Unit Trust or ETFs. They generate slightly lower returns than UTs/ETFs because of the added cost of agent sales commission and insurance. As for Robo, the underlying are ETFs, except that there is some supposedly superior algorithm actively managing your portfolio.
Hence, choosing anything from option 2-5 will at best only yield market-average (i.e. index) returns, with lower returns for those with added services such as agent servicing, insurance, and active management. While investing in any of these products may yield very good returns (say, more than 20% p.a.) on particular years -- such as equities between 2005-2007 -- they are the exception rather than the norm. The norm -- the longer-term average -- is something like 3-5% p.a.. Even then, most may not even get such returns due to the investor's inability to stomach volatility, or just wait patiently.
So how? Fixed deposits too low, structured deposits too long, property too restrictive, and ETF/UT/Insurance/Robo does not deliver stable/predictable/good returns. I want to make a killing. But the equity markets looks even more risky, and I know next to nothing. So how?
In the past, return-hungry investors had the choice of land banking, oil pods, time-share, gold buy-backs, and so on.
But the public has since become (slightly) smarter. They are now less likely to fall for your 'high-return investments,' perhaps at least for the time being.
So how does the market satisfy these return-hungry, non-AI-but-quite-rich, and more savvy, investors?
===
I agree that the purpose of only allowing AI to subscribe to boutique funds are meant to protect the non-AI. But by 'protecting' the non-AI, they are made vulnerable to 'investment education' salesmen. Besides, the volatility of most long-only boutique funds does not differ too much from their benchmark indices.
So I think MAS should move towards allows for the non-AI-but-quite-rich segment to be more adequately served, preferably with more access to those services available to AI. Perhaps MAS' rationale is that these group of people are already adequately served by the wealth management units of big banks. Perhaps to protect the non-AI-but-quite-rich market of these big banks.
My opinion is that the market for investment needs to be freer to reduce 'waste' and enhance competitiveness.