Friday, March 02, 2007

No load investment fund

An overseas insurance company is seeking my advice on the setting up of a no-load investment fund.

This fund does not have any front-end load. All money are invested in full to buy units at their net asset value (or bid price).

The fund manager takes an annual fee of 1.5% to 2%. This is used to pay for the expenses of managing the investments and to pay the commission to the adviser.

The investor is happy to pay a higher annual fee, as it is taken from the annual return on the fund. For example, if the fund earns 8% and the annual fee is 1.5%, the investor earns a net of 6.5% (assuming an annual fee of 1.5%).

There is possibly a need for a "trailer fee". This is deducted from the proceeds, if the investor sells the funds during the initial 3 to 5 years. The trailer fee can be, say, 0.5% for each remaining year of the minimum period.

I believe that this type of fund is available in Singapore, although it is not well marketed.

1 comment:

  1. I think the Wealth Creator from Aviva is quite similar to what you have mentioned

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