Wednesday, June 23, 2010

ILP fund

Dear Mr Tan,
I am currently reading up on Unit Trusts and ILPs. Are all ILPs invested in Unit Trusts?

An ILP operates like a unit trust. The insurance company put the ILP premium into a fund and invest the fund in shares, bonds, unit trusts and other assts. The ILP fund is divided into units. The price of each unit of the ILP fund is calculated daily based on the underlying value of the assets, divided by the number of units. Hence, the ILP fund is managed like a unit trust. Usually, the insurance company managed the investments of the ILP fund using their inhouse fund managers, but they may also outsource the investing to external fund managers.

1 comment:

Anonymous said...

For consumers considering ILPs --- my message is DON'T!!

Ask yourself why you are interested in the ILP. Is it for investment gains? Is it to diversify your investment portfolio? Or is it for insurance with the "hoped for" potential of extra returns?

If it's mainly for investment purposes, just get best-of-breed UTs and/or related ETFs.

If it's mainly for insurance, please just get pure term insurance.

If you want both insurance and investment returns, then get term insurance and UTs/ETFs separately.

Btw, many ILPs are invested in funds which are available as UTs. These UTs may not be the best-of-breed. Furthermore it is guaranteed that the performance of the ILP is worse than the underlying UT itself due to expenses and fees to the insurance company and agents.

The ONLY reason why you will want to buy an ILP is if you discover that the underlying investment is so Shiok and so Compelling and you cannot obtain that underlying investment anywhere else as standalone UT or ETF. After 20 years, I have yet to see such ILP.

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