Dear Mr. Tan,
I have recently received a notice from DBS on behalf of Schroder Investment Management (Singapore) Ltd that they plan to alter the product characteristics of the DBS Schroder LiveSure 2025 fund to the disadvantage of the consumers. The changes contravene the purpose and the way the fund was marketed to us, as ordinary small investors.
We are given 3 choices moving ahead and I feel none of them are reasonable to any sane human. I want to share this news and urge those who are facing similar situation not concede to any of their 3 proposed options, which might not be in your interest.
If you feel this is of worthy mention, please help post this on your blog.
Colin Ho
Background
This fund is marketed in their brochures as “a unique retirement solution that aims to achieve superior long term risk-adjusted returns through an actively-managed multi-asset portfolio of mutual funds.”.
The brochure clearly states these key benefits:
1. Principal protection upon maturity
2. Exposure to a well-balanced portfolio managed by Schroders Multi-Asset Team
3. Profit lock-in mechanism.
This is designed to raise your level of principal protection at maturity. Any gains achieved by the Fund will be locked in each week, ensuring that the fund’s highest NAV will be locked in as target min NAV level for your investment upon maturity in year 2025.
4. Automatic re-balancing mechanism.
The portfolio will automatically become more conservative with lower expected volatility and risk as the target date draws near.
What we understood
From the way DBS and Schroder has marketed it, was that the fund is for retirement purpose with maturity in 2025. The NAV will swing along the way but over the next 20+ years, it’s likely the NAV will go beyond 1.00 and this higher NAV will be locked in and if we hold the fund till maturity in 2025, we’ll enjoy this “locked-in” NAV.
What has happened
Just 8 months after I subscribed to the fund, Schroder, through DBS, sent us a letter saying the fund was monetised stating that: “The last 6 months have seen dramatic falls in asset values caused primarily by the credit crunch. In addition, we have witnessed a fall in long term SGD interest rates from 4.50% to the 2.6% we see today.”....”we reached the point where the assets of the Fund were sufficient only to purchase instruments (safe portfolio) that would be expected to deliver the target protection level on the Maturity Date. We therefore invested the Funds assets into such instruments on Monday 24th November 2008”.
We are now given 3 choices:
1. Stay invested in the Fund. Unit trust investors can choose to stay invested in the Fund which is primarily invested in SGD government bonds. At maturity, investors are expected to receive the NAV of $1.0004, subject to the risks abovementioned in section 7.
2. Switch into another Schroder fund distributed by DBS. Investors can choose to switch their existing units into any other Schroder fund distributed by DBS, The switching fee will be waived. 3. Redeem their units at the prevailing NAV. Please note that the Manage will continue to publish weekly NAVs for the Fund, which may be different from the current NAV of S$0.6932 (as at 19 November 2008).
Investor is subject to option #1 as the default option if they do not decide.
What’s Wrong?
In my opinion, they’re now trying to unilaterally alter the product behaviour and go against what they have sold to consumers. Being a retirement fund with maturity date in 2025, how can they, within just 8 months of launch, say the profit lock-in mechanism can no longer support a NAV beyond $1.0004. As a long term investor, I understand the volatility of the markets and am willing to ride the downs and look forward to the ups in the next 26 years. But these people are telling me sorry, at best they can pay me a NAV of $1.0004 (with no guarantee) in year 2025! Essentially, they are trying to modify key benefits #3 and #4 listed above to their advantage.
With these changes, the product is substantially different from how it was marketed to me.
The options to consumers are equally ridiculous. The 1st option is asking the investor to remain status quo till maturity in 26 years time. And for that, the investor will be rewarded with NAV $0.0004 return but with all their caveats that tells you it’s not guaranteed. The 2nd option is asking the investor to sell it at current NAV (i.e. make loss of close to 50%) and buy another Schroder fund. The 3rd option is the worst: asking investor to sell it at current NAV, make a loss, and we part ways.
I feel DBS and Schroder could have put in greater efforts to protect consumers’ interest. And unlike the case of the mini bonds, the DBS Schroder LiveSure 2025 fund doesn’t involve default. But yet, they are asking consumers to accept unreasonable draconian actions which would mostly inflict financial losses.
I am seeking refund, from the bank, the full amount I’ve invested. I urge other investors to exercise your rights and not opt in to any of their 3 proposed options.
Colin Ho
Survey:
http://www.surveymonkey.com/s.aspx?sm=7adJB4Ub4k7OqUE8YLkzkg_3d_3d
Isn't this how NTUC Income operates too? First get honest to goodness Tan Kin Lian to helm it. Then when enough policyholders over 30 years believe in this man and put all their savings and hopes in the policies of NTUC Income with their reputation for being conservative and for the welfare of policyholders.
ReplyDeleteThen suddenly retire Tan KL and put in a Malaysian who soon got his foreign friends in. Fired alot of local Singaporeans, at least one of them eventually died and was reported in a blog, see link:
http://akhiat.blogspot.com/2008/12/another-close-comrade-passed-away.html
Then began the party as meetings are held in posh hotels, expensive chairs costing S$40,000 were purchased and renovations started to make it all nice and comfortable. Then came the cut in annual bonus and the rest is history. Tried contacting the CEO but sorry, he is too important and busy to talk with you.
What are the options?
1. Remain with them and see your returns dwindle.
2. Switch to another policy and lose all accumulated bonuses and pay for all the high charges all over again. Hey, at least Colin get a waiver of fees.
3. Surrender your policies and immediately realised any loss.
Isn't this the same style? Now, I wonder who copied from who? But one thing I am sure, those who approved this idea are foreigners.
"I feel [Banks] could have put in greater efforts to protect consumers’ interest."
ReplyDeleteI actually laugh when i came to this!
So much effort was spent doping people with their cash pile in on false hope, what makes one think they would spend equal or more effort PROTECTING THEM hahaha!?
"I am seeking refund, from the bank, the full amount I’ve invested."
ReplyDeleteThis might not get posted, but it does set anyone wondering if theres is a wind of 'REFUNDS' these days
DBS is a screwed up bank.
ReplyDeleteDon't waste time with them !
Chao
The fund has gone into 100% bonds because of sharp drop in the equity portion. In order to achieve the mandate of delivering the highest NAV ever reach, it has to now go into 100% bonds so that it will grow to the highest NAV ever reach. From what I see there is nothing wrong with that because that is how "highest NAV" lock-in mechanism work and this is also the risk in investing in such fund.
ReplyDeleteThe poster says that the current NAV is 0.6932 and the NAV at 2025 is 1.0004 which is the highest price ever reached. From now until 2025 is about 17 years. Therefore the return from now till 2025 is (1.0004/0.6932)^(1/17) -1 = 2.18% pa. This return is reasonable considering the reinvestment risk of SGS bonds.
The lesson? Don't buy a product. Buy a portfolio suitable according to one's needs.
- From an Industry Insider.
Sure, there is nothing wrong! In the mind of financial left brain whizkids, there is nothing wrong with enriching themselves at other people's expense. This is the real world they say. There is nothing wrong when people who slogged hard and saved hard all their lives lose their hardearned money so these left brainers with their sharp intellect and calculating minds enjoy their daily lives and high rolling spending. There is nothing wrong with changing the rules midstream as long as these left brainers do it legally. There is nothing wrong in subjecting your fellow humans to so much misery?
ReplyDeleteIt is only fair that the highest NAV to be locked-in be measured from the launch of the fund till maturity in year 2025, and not just after 8 mths.
ReplyDeleteFor a person who invested right at the start with NAV of $1, his/her NAV gain is only $0.0004 in 2025.
I guess the investors have to keep bugging DBS until DBS cough out your money. I encourgae you to do that.
ReplyDeleteDon't waste yr time Colin Ho. Accept yr loss. Or sue for misselling, if you can prove that the risk of this type of product was not told to you.
ReplyDeleteReading what you posted,the fund had to go into S'pore gov bond because because this is how the "highest NAV" lock-in mechanism works. It could have worked in yr favour but it didn't.
That is the risk in investing in such fund just before one of the biggest mkt collapses since the 1930s.
Sadly what this shows is that DBS marketed another DOG with ticks on it.
Join the HN2, HNS investors Colin.
Ah,..., another day another victim. DBS, Cayman Island, structured product, ... are we on familiar ground? Expect same comments from people whose brain need to be examined like 'you greedy, you go in with your eyes open, you take risk you pay,.... You remember not too long ago, town councils were criticised for being too conservative by putting their money only in fixed deposits. Singaporeans were told they were too conservative, must take risk, expand overseas, etc. So we import CEOs for the banks and with them come CDOs and other 'creative' structured products. In top financial centres such as New York and London, these banks who dare to snare investors with toxic products are not only fined but have to return the money to investors. In less developed financial centres such as Kuala Lumpur, they are not even allowed to sell such products. Banking is now a dangerous activity where banking sharks are lurking. Their favourite food are retirees, those planning for retirement and those who dare plan for their childrens education. When you claim for refund here, they will tell you 'you signed for it; if not happy go to Fidrec'. If you have written proof, they will tell you 'but this is a typo error'. Why can't we have back the Old POSB with the Old Management so that we can do banking with peace of mind?
ReplyDeleteAr! DBS Bank again.
ReplyDeleteAnother case of a lazy Singaporean being sold a product that promises but never deliver. I would advise Mr Collin to read through the prospectus before launching a complain. You need to think before you act the next time.
ReplyDeleteis this a possible reason why DBS is having a sgd 4 bn rights issuance? Perhaps it has also made some very bad investments in the funds that itself is promoting?
ReplyDeleteUnfortunately, it is likely you will have little recourse.
ReplyDeleteThe thing about such "highest lock in" products is that the protection is obtained by holding a certain percentage of zero coupon bonds.
Due to the extreme conditions of the market, the fund has been forced to go into 100% of such bonds to ensure the return of the highest NAV reached.
If the fund manager did not send you this letter, you would be none the wiser and the fund price would have gone up gradually over the next 17 years to 1.0004.
Would you have lodged a complaint then?
A product with "locked in" returns is easier to market but at the end of the day, the protection comes at a cost and a trade-off.
You sacrifice the potential of returns for a guarantee.
If you think about it, another investor who had bought an equity only fund might be looking at losses at 80% now and he won't even know whether he can recover his capital in 17 years time.
Also, it is just plain bad luck that the highest NAV reached was just 1.004.
ReplyDeleteIf the product had been launched 1 year earlier, the highest NAV could have been 1.10 or even 1.20.
Then at least the final returns wouldn't have been as bad as now.