Poor performance of two bond funds

QUESTION FROM POLICYHOLDER

I have invested in your 2 bond funds. I want an explanation for the under-performance of these funds. I have attended your talk. You said if fund manager consistently do not perform you are going to remove them. Why have you NOT kept your word?

Now it has been 3 years of underperformance - you are still going to keep them? Or are you going to do the right thing for policyholders who have entrusted our money to you? Customers expect swift and robust action to correct this problem!

REPLY

NTUC Income operates two bond funds - the Global Bond fund and the Singapore Bond fund.

The annualised return for the past 3 years is:

Global Bond - 3.4% p.a. (benchmark: 3.3% p.a.)
Singapore Bond - 1.2% p.a. (benchmark: 1.8% p.a.)

The return on Singapore bonds has been rather low, due mainly to the low interest rate in Singapore.

The return on the bond funds are affected by the recent increase in interest rate. This is a temporary situation. If the investment is kept for a longer period of 5 to 10 years, the average return will be about 3.5% p.a.

Investment in bonds have low risk, but the return is also low.

If the actual performance is within 1% of the benchmark (in the case of bonds), we consider the performance to be acceptable. We have to accept a small degree of fluctuation.

My advice: If you are investing for 10 years or longer, you should choose the global equity or the combined fund. Risk is to your advantage.