Friday, December 26, 2008

A Peek Into the Fund Managers Holdings

Fund managers seem to be very restricted in their investments. We were just thinking one day and imagining when a large redemption occurs, if fund managers had placed their allocations into stocks that are highly illiquid, they will find it quite difficult to sell such stocks and therefore have to sell them at a very low price so as to meet the redemption. This implies they would prefer to place their allocations into stocks that are more liquid. Judging by the monthly fact sheets published by them, where they show the funds' top 10 holdings, it is usually the common suspects which are highly liquid, Singtel, DBS, UOB, OCBC e.t.c. But are there interesting stocks not shown? Let us see.

Since the market is pretty uninteresting at the moment, we decided to peer into their equity holdings as shown in their prospectus, just to kaypoh a bit. We randomly picked 5 funds, whose objectives are generally the same : Capital Appreciation in the medium to long term. We have highlighted counters which only appears in one fund. Therefore, the fund with the most red colour counters is quite gungho as they have the most different counters. Some of the red counters are really bad investments with totally no fundamentals are all, in our opinion.( Actually, its includes many of the black colour ones too) But its good to see some variety.

Aberdeen Singapore Equity Fund ( As at 30 Sep 2008)
Bukit Sembawang Estates Limited
Capitaland Limited
City Developments Limited
ComfortDelGro Corporation Limited
Eu Yan Sang International Limited
FJ Benjamin Holdings Limited
Fraser & Neave Ltd
Hong Leong Finance Limited
Keppel Corporation Limited
Oversea-Chinese Banking Corporation Limited
SBS Transit Limited
SembCorp Marine Limited
Singapore Airlines Limited
Singapore Airport Terminal Services Limited
Singapore Exchange Limited
Singapore Food Industries Limited
Singapore Petroleum Co Limited
Singapore Post Limited
Singapore Press Holdings Limited
Singapore Technologies Engineering Limited
Singapore Telecommunications Limited
United Overseas Bank Limited
Venture Corporation Limited
WBL Corporation Limited
Wheelock Properties (S) Limited

(SGDividends : Wah, all the counters like really household names man!)

HGIF Spore Eq-A USD (As at 30 Sep 2008)
ALLGREEN PROPERTIES LTD
BANYAN TREE HOLDINGS
CITY DEVELOPMENTS LTD
DBS GROUP HOLDINGS LTD
HO BEE INVESTMENT LTD
JAYA HOLDINGS LTD
KEPPEL CORP LTD
MOBILEONE LTD
SC GLOBAL DEVELOPMENTS
SEMBCORP MARINE LTD
SINGAPORE AIRLINES LTD
SINGAPORE EXCHANGE LTD
SINGAPORE PRESS HOLDINGS LTD
SINGAPORE TELECOMMUNICATIONS
STRAITS ASIA RESOURCES
UTD OVERSEAS BK
VENTURE CORPORATION
WHEELOCKPROPERT(SINGAPORE)LTD
WING TAI HLDS
SARIN TECHNOLOGIES LTD
BEAUTY CHINA HOLDINGS
ARA ASSET MANAGEMENT
MERMAID MARITIME PCL

Lion Global Balanced Fund (30 June 2008)
DBS Group Holdings Limited
United Overseas Bank Limited
Oversea-Chinese Banking Corporation
MacarthurCook Industrial Real Estate Investment Trust
CapitaMall Trust
Macquarie International Infrastructure Fund Limited
CapitaLand Limited
Hongkong Land Holdings Limited
Frasers Centrepoint Trust
CDL Hospitality Trusts
Suntec Real Estate Investment Trust
Ascendas India Trust
Ascendas Real Estate InvestmentTrust
SMRT Corporation Limited
Singapore Post Limited
Cosco Corporation (Singapore)Limited
Hyflux Limited
Unisteel Technology Limited
Singapore Technologies Engineering
AusGroup Limited
SBS Transit Limited
Peace Mark
Raffles Medical Group Limited
Wilmar International Limited
Ezion Holdings Limited
China Fishery Group Limited
Thomson Medical Centre Limited
Singapore Telecommunications
StarHub Limited
Keppel Corporation Limited
Tat Hong Holdings Limited
CitySpring Infrastructure Trust
Ferrochina Limited

SCHRODER SINGAPORE TRUST CL A(3o June 2008)
Asia Dekor Hldg Lt
Fraser and Neave Ltd
Golden Agri-Resources Ltd
Jardine Cycle &Carriage Ltd
Parkway Hldg Ltd
Singapore Airlines Ltd
Singapore Post Ltd
Singapore Press Hldg Ltd
Wilmar Intl Ltd
Jardine Strategic Hldg Ltd
Noble Group Ltd
ARA Asset Management Ltd
DBS Group Hldg Ltd
Keppel Corp Ltd
Oversea-Chinese Banking Corp Ltd
Singapore Exchange Ltd
United Overseas Bank Ltd
ASL Marine Hldg Ltd
ComfortDelGro Corp Ltd
Cosco Corp (Singapore) Ltd
Hiap Seng Engineering Ltd
Pan-United Corp Ltd
Rotary Engineering Ltd
SembCorp Ind Ltd
Singapore Technologies Engineering Ltd
Allgreen Properties Ltd
Ascendas Real Estate Investment Trust
Ascott Residence Trust
Bukit Sembawang Estates Ltd
Capitaland Ltd
CapitaMall Trust
City Developments Ltd
Guocoland Ltd
Keppel Land Ltd
Suntec Real Estate Investment Trust
UOL Group Ltd

Wing Tai Hldg Ltd
Datacraft Asia Ltd
Singapore Telecommunications
Total Access Communication PCL

DWS SINGAPORE EQUITY FUND(30 June 2008)
DBS Group Holdings Limited
United Overseas Bank Limited
Keppel Corporation Limited
Oversea-Chinese Banking Corporation
Singapore Press Holdings Limited
SembCorp Industries
Capitaland Limited
Cosco Corporation (Singapore) Limited
StarHub Limited
Fraser & Neave Limited
SMRT Corporation Limited
Capitamall Trust Real Estate Investment Trust
City Developments Limited
Singapore Exchange Limited
Wilmar International Limited
CDL Hospitality Trusts
Hotel Properties Limited
UOL Group Limited
Raffles Medical Group Limited
Jaya Holdings Limited
Unisteel Technology Limited
Ascott Residence Trust Real Estate Investment Trust
FJ Benjamin Holdings Limited
Singapore Airlines Limited
Wheelock Properties (S) Limited
Allgreen Properties Limited
Ausgroup Limited
Yanlord Land Group Limited
China Eratat Sports Fashion Limited
First Resources
Synear Food Holdings Limited

"Wide diversification is only required when investors do not understand what they are doing."- Warren (Pot calling the kettle black. Just joking, it makes sense actually.)


"Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing" - Old Fogey WB


The strategy we've adopted precludes our following standard diversification dogma. Many pundits would therefore say the strategy must be riskier than that employed by more conventional investors. We disagree. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it. - Old Fogey WB



Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

6 comments:

  1. hi guys...very interesting blog, at least its smth different from the rest. i'm 22 at looking to invest in a fund for the long term. question is...which fund? there's a million and one of them out there.

    most of these funds i've been looking at seems to have one thing in common...very widely diversified. previously i thought this was good, since it reduces risk, should any one of the companies crash. but now at least i know a little better. thanks guys!

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  2. Some of the names are certainly unfamiliar to me. Perhaps it's because I'm just a newbie investor compared to the Fund Managers who have CFA after their names, wear smart pant-suits or ties and have been unable to forsee the global financial crisis.

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  3. Hi Zako,

    Thanks for reading! :).

    We don't know which fund is good but frankly, what for pay additional money to people to manage it when it is actually really easy to DIY.

    You can check out www.investopedia.com to learn more ( or our shameless links). Its fun doing it yourself too.

    Hi PanzerGrenadier,

    haha...Fund Managers are smart people ok....but its just that they are severely overpaid for the things they do.

    SGDividends Team 3

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  4. Hi guys, another well written piece of work.
    This topic certainly requires more study into. I will suggest some pointers,
    1) Liquidity
    Some funds have internal guideline not to invest more than a certain % of AUM on a particular entity. OR to own no more than certain% of the outstanding shares.
    This is important consideration given the relative small size (mkt cap) of companies in Singapore and Asia ex-Japan.
    Just look at why so many funds (in particular hedge fund) are losing o much money this time run. One main culprit is their large holding in any single name. It is difficult for them to exit those name because of a) the size own b)the signal they will send out i.e a fund which own more than 5% of a entity, even exiting a small portion will have a negative impact on the share price.

    2) Fees Paid
    I agree that most of the fees payable are a little too high. A great portion of this fee are actually paid to the middle party, so this is one area tha our regulator can look at.
    going forward, i think more creativity is needed for the fee structure. Most will have no problem paying a performance fee as long as the fund perform. Of course the risk is the manager will tke excessive risk.

    I think more can be done to regulate the way most of the public fund run the portfolio. There has to be clear risk parameters put in place, and an independent body to enforce this for the fund.

    I am sure that there will be more to this topic.

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  5. Hi Zhuangzi,

    Nice to have you back. Thanks and happy 2009..let the paaaaaaarTY begin!

    Sounds logical that funds are not allowed to focus too much into one company.

    Actually, we were thinking of finding out the internal guidelines on the minimum prices that each counter has to be before a UT fund can invest in it. Then we go look for good companies trading below that threshold, hopefully in the course of time, when their prices go up above the threshold, funds( assuming they go for fundamentals) will rush in and snap them up and rocket the shares.....just a thought lah cos we want to anticipate the anticipation of others and we are pretty boliao.. =)

    SGDividends Party Booper. ( Oil is such a political issue..)

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  6. Its a good idea if these UT funds are paid based solely on how much the fund beats the index. For example, take the average of daily (fund price closing - Index price closing) X a certain %. Scrap the management fees totally. Just performance fee will be paid. This will ensure people pay for real value added service.

    However, this might then result in UT funds taking excessive risk to create a high potential return, so there needs to be a mechanism to prevent this negative risk taking portion.

    To disincentivise such risk taking, it could be a good idea to accumulate the yearly underperformance and only when these underperformance has been net off with the yearly gains, can UT funds be paid the resultant performance fee.

    So the above results in 3 things:
    1) Pay for reward
    2) Disincentivise risk taking because the more risk you take, the more loss you will eat.
    3) UT fund managers will therefore adhere strictly to the philsophy of maximising reward, minimising risk.

    In fact, some business trusts in Spore, are SOMETHING like that, they are paid performance fee ( bonus) + basic management fee. The performance fee works exactly how we wrote about above. Basically, just scrap the management fee for UT funds.

    As usual its easier said then done as for open-ended funds, how do we account for such a mechanism? Should new investors ride on the accumulated underperformance at the realised expense of existing inevstors? So it could be quite complicated but the giss is there...

    This is the most fair and logical method we can think of.

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