Monday, June 02, 2008

Foreign Currency Fixed Deposit

Many people like to invest in foreign currency fixed deposit, such as Australian or New Zealand dollars, to enjoy the higher interest rate. They face a few practical difficulties:

> get a good conversion rate from Singapore dollar to the foreign currency
> get a good interest rate on the foreign currency deposit

It is possible to set up a fund that will invest in a few high yielding foreign currency fixed deposits, e.g. Australian dollar, New Zealand dollar, British pounds, Euro and US dollar. These currencies have higher interest rate than Singapore dollars.

The fund manager will be able to source for the most competitive exchange and interest rate. This should save the investor up to 1% spread on the currency and interest rate. This should be more than sufficient to cover the fee of the fund manager, and still give an additional benefit to the investor. The investor will be able to enjoy the higher interest rate and the spread of currencies.

I think that there should be interest in this type of fund.
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1 comment:

Unknown said...

Dear Mr. Tan,

You may like to know that we offer a portfolio of foreign currency fixed deposits to retirees who would like some form of income from the fixed deposits. While the interest income cannot be guaranteed (due to forex risk & interest rate risk), some retirees like this idea because they already have other form of more secure income stream like traditional annuity. The effective interest rate (after neting off fees) are similar to local banks but we offer many valued-added services. A full description can be read from here: http://www.wilfredling.com/content/view/312/56/

We can provide many value added services and still earn a decent cut in the management fee with the net interest still comparable with local banks because (1) The bid-ask spread of the forex conversion is less than 0.5% and sometimes it is even better. This is because we are getting institution rates. (2) The interest we are getting is higher than local bank - again because these are institution rates.

Hope you can tell others about this.

June 02, 2008 10:29 PM

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