Saturday, 23 February 2019

A look back at Unit Trusts

There was some discussion in the forum about whether there was any investment that could give a steady 6%. This prompted me to look at the latest performance of my unit trust holdings. My unit trust holdings are in FSM CPF-OA as there is no platform fee for CPF holdings. I would like to highlight the two biggest unit trusts that I hold. Both are from First State Bridge. It is no coincidence that the Fund House is the same as both are managed by my favourite fund manager Martin Lau. 

First State Regional China is one of my largest holdings and part of my strategy to overweight China as I believed in the China growth story. It has given me a decent annualised 12.55% p.a. over a 10 year period. Looking at that return, I guess it is not surprising that it turned into one of my biggest holdings. 

However, there is some volatility as the 6mth and 1 yr performance are negative. Nevertheless, I will continue to hold the fund in CPF-OA. When it comes to cash investments, I have highlighted elsewhere that FSMOne is a good platform for HKSE shares so one is no longer restricted to unit trusts for China exposure.

First State Bridge is a balanced fund that seeks to hold equities and bonds in a 50:50 ratio. It is one of my favourite funds because of its defensive qualities and ability to rebalance. Despite holding 50% bonds it has been able to deliver a very respectable an annualised 9.45%  p.a. for the last 10 years. On a risk adjusted basis, this performance might well be far more impressive that the performance of the China fund.

So it does very well in a downturn but in a charging bull market may not be able to compete with high beta products. I'm vested as part of a diversification strategy and its not my habit to go 'all in' on one single unit trust (i.e. China).  FSMOne allows free switching so I can easily vary the ratio of First State Bridge and First State China that I hold.

Concluding Thoughts

It is very easy to say unit trusts are bad. But my view is that sometimes you spend money to make money. The alternative would be for my CPF-OA to be entirely used for STI ETF which was not good from the perspective of diversification. 

I certainly feel that some unit trusts are worthy of criticism, but the keyboard warriors don't seem to want to take the time and effort to study the unit trusts and separate the good from the bad - everything is just bad to them. While the debate rages on in the internet, I just keep on holding, and check on my capital gains every year! Not as satisfying as counting dividends, but it will have to do...

No comments:

Post a Comment