By Genevieve Cua
FIDELITY Investments has launched another 25 offshore funds here, bringing to 58 the total number of funds available for retail investment in Singapore. The 58 funds collectively represent some US$40 billion in assets, domiciled in Luxembourg.
As if the range of choices wasn't bewildering enough, the new entrants include esoteric single region funds like the Iberia Fund and the Nordic Fund, and even a broadbased indexed fund tracking the Euro Stoxx 50 Index.
General manager Andrew Jenkins is unable to specify how much Fidelity's first batch of 33 funds has raised so far from local investors. But with the new launches, he expects new subscriptions to be 'very significant'. 'We're exceeding our original budget right now and some distributors are not necessarily active yet.'
Mr Jenkins is hoping that disillusionment over the muted returns of capital protected funds will lead to a resurgence in investments in funds without a guarantee. 'We believe there is a high probability of investors looking to invest in long-only products. We've had one of the most buoyant and fastest-rising equity markets in recent years.'
He reckons that roughly 70 per cent of protected funds had a negative return in the last 12 months. The median return of such funds over the period is estimated to be minus 2.45 per cent. The 33 funds that Fidelity first registered delivered a median return of 35 per cent over the same period.
Fidelity funds are available through banks like Maybank, HSBC, Citibank and portals like fundsupermart and dollarDEX. The base currency of the Luxembourg range of funds tends to be US dollar or euro, but the Japan funds, for example, are in yen.
Mr Jenkins said offering a Singapore dollar class of funds, which has to be specifically set up, may enhance marketability. But it would also raise expenses. 'We may have to do (a Sing dollar class). I'm extremely reluctant to do so because it's misleading.'
Many investors mistakenly believe that buying a fund in Singapore dollars means there is no foreign currency risk. But the actual foreign currency exposure will depend on the underlying assets.
The new additions now mean Fidelity has the largest range of European equity funds at 14. It also has two new Japan equity funds - Japan Advantage, an aggressive 'special situations' fund, and Japan Smaller Companies Fund.
On markets, Mr Jenkins says the group expects interest rates to tick up from August this year. There are also early signs of inflation, which do not bode well for bonds.
'We're very keen on Asia, but it is a volatile market, very driven by hot money.' Still, Asia ex-Japan equities are trading at a price-to-book multiple of 1.8 times compared to 2.5 times for world equities.
Fidelity, however, says from a valuations point of view, Japan equities offer 'optimal upside potential'. At a price-to-earnings multiple of 17 times, valuations are comparable with US and Europe. But there are also positive factors. Companies' private capital expenditure is set to recover for the first time since 2000; exports are also improving. Banks have also put the worst of their bad-debt problems behind them.
Source: The Business Times, Singapore
