Monday February 10, 3:45 PM
LOOKING TO BEAT LOW FIXED DEPOSIT RETURNS?
By Vasu Menon, Chief Editorial finatiQ
Not happy with the meagre returns on your fixed deposits?
With deposit rates at multi-year lows, the return on cash is pathetic. For those with a low threshold for risk, equities may not be a palatable alternative, given the extreme volatility and uncertainties looming in the horizon.
Even if you have the risk appetite, it will be unwise to throw all your investments into equities. Sound asset allocation calls for placing some of your surplus funds into bonds and other alternatives that will allows you to enjoy better risk-adjusted returns.
If you are looking to put your cash savings to harder work, the Yield Enhancement Fund^ - soley marketed by AIG International Funds (Singapore) - is an attractive alternative to consider.
The fund will be available at finatiQ until 28 March 2003. A minimum investment of only S$5,000 is required to invest in this fund. It can also be purchased with SRS savings.
It can offer higher payouts compared to fixed deposits (see tables below). The fund has a 4.5 years tenure. It offers a fixed payout of 3%* p.a. in the first three years and 6%* in the remaining 1.5 years i.e. total payout of 15%* over 4.5 years. These payouts are independent of stock market performance.
The fund will comprise of a diversified basket of 25 investment grade bonds that are rated Baa3 with stable outlook by Moody's Investor Services.
The fund manager seeks to provide 100% principal* repayment at maturity. This is however contingent upon no default by the 25 obligors. In the event of default, the fixed payout will be computed based on the reduced principal. According to Moody's Investor Services, the historic probability of a single Baa bond defaulting during the 4.5 years tenure is only 1.7%.
To reduce risk further, the basket of 25 bonds will be geographically diversified, with a targeted allocation of a minimum 30% in the US, 30% to 45% in Europe and a maximum of 20% in Asia.
The 25 bonds will be chosen from an initial list of 40 household names including General Motors, Philip Morris, Ford Motor, Rolls-Royce, Olivetti SpA, Tenaga Nasional Berhad and SK Corporation.
Investors can redeem prior to maturity but it is not advisable as the 100% principal repayment only applies to units held till maturity.
Unlike traditional unit trusts, there will be no initial sales charge for this fund. But the annual management fee, inclusive of selling, marketing and advisory fees for the entire 4.5 years period, will be deducted upfront from the principal raised. The trustee/admin and tax fees will be deducted on an accrual basis. There will be no refund for investors who redeem their units prior to maturity.
YIELD ENHANCEMENT FUND^ - WHAT AN INVESTOR WILL GET
(Assume $100,000 investment)
| Year 1 |
3% |
$3,000 |
| Year 2 |
3% |
$3,000 |
| Year 3 |
3% |
$3,000 |
| Year 4.5 |
6% |
$6,000 |
| TOTAL |
15% |
$15,000 |
FIXED DEPOSIT RATES - Selected banks (11/2/03)
(For Amounts above $50,000)
| ABN-AMRO |
$20,000 - $50,000 |
0.5900% |
| Bank of East Asia |
Above $50,000 |
1.5000% |
| Citibank |
$50,001 - $100,000 |
0.9600% |
| DBS |
$50,000 - $99,999 |
0.6875% |
| Hong Leong Finance |
Up to $50,000 |
1.3750% |
| HSBC |
(Indicative) |
0.6250% |
| Maybank |
$50,001 - $99,999 |
0.7500% |
| OCBC |
$50,001 - $999,999 |
1.3750% |
| UOB |
$50,000 - $99,999 |
0.7500% |
| Sing Investment & Finance |
Up to $100,000 |
1.3750% |
| Standard Chartered |
$50,000 - $99,999 |
1.1250% |
Source: finatiQ
EARLY BIRD INCENTIVE
Hurry! Invest now and be one of our early birds to receive special premium gifts (while stocks last). Investments up to $29,999 will receive an ultra-light umbrella with pouch while investments above $30,000 will receive a 1-night stay in Genting for 2. Terms and conditions+ apply.
+Each investor is only entitled to one premium gift per transaction. Amount invested must be made on the same dealing date. Investment must be made between 10 February 2003 to 28 March 2003.
* This is not guaranteed fund. The 100% principal repayment is dependent upon no default or credit event affecting any of the 25 selected obligors of debt obligations in the basket. If the default or credit event occurs, the principal repayment amount will be reduced and the periodic payment will be computed based on the reduced principal. Please see "Risk Factors" in the Prospectus.
^ The Yield Enhancement Fund is a sub-fund of Xavex Sicav, Luxembourg-based investment company will variable capital. Xavex Sicav is recognised in Singapore for retail distribution.
Important Notice: This material does not constitute an offer of shares in the Yield Enhancement Fund (the "Fund"), a sub-fund of Xavex Sicav. The Prospectus of the Fund is available, and may be obtained upon request, subject to availability, from the sole marketing agent, AIG International Funds (Singapore), and finatiQ website. Investors should read the Prospectus before deciding whether or not to subscribe for or purchase shares in the Fund ("Shares"). The value of the Shares and the income from them may fall as well as rise. The Shares are not obligations of, deposits in, or guaranteed by Deutsche Bank AG or AIG investment Corporation (Singapore) Limited or any of their affiliates. An investment in the Share is subject to investment risks, including the possible loss of the principal amount invested. Investors are advised to read the "Risk Factors" section of the Prospectus for further details. Any prediction, projection or forecast is not necessarily indicative of the future or likely performance of the Fund. For Singapore regulatory purposes, Xavex SICAV, a Luxembourg-based investment company with variable capital, is the responsible person for the Fund.
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