MBH/A35 alternatives

[peachmouse]

https://endowus.com/investment-funds-list/amundi-index-global-aggregate-fund-LU2420246212

This one only has TER of 0.1%. with endowus fee it's just 0.4%p.a..

Sure, MBH is cheaper on an annualised basis, but is paying 10+ basis point worth it for more diversification and a more convenient user experience (no need to reinvest dividends, lower agent bank fees, can invest in a fractionalised manner)?

Not having the 3+% dividend pay out compounding might cause you more. That's the reality that people gonna face if they buy a non accumulating fund.

Let's look at MBH and the above Amundi Global Aggregate Bond (GAB) based on July 2024 factsheet.
- GAB has slightly longer duration than MBH.
- Yield-to-Maturity is similar for both.
- MBH holds SGD-denominated bonds, while GAB holds bonds of different currencies.
- MBH disbursed payout twice a year, while GAB don't. GAB re-invests bond payouts into its fund.
- MBH annual expense ratio is cheaper than GAB (after including Endowus charges).

Endowus Amundi Global Aggregate Bond (GAB)
Duration: 6.51
Yield-to-Maturity: 3.64%
Average credit rating: A

Source: https://asiaapi.morningstar.com/ODS...tId=endowus&MarketId=CU$$$$$SGP&LanguageId=EN

Total expense ratio: 0.4% or 0.5% = 0.1% (fund itself) + 0.3% or 0.4%* (endowus)
Endowes charges 0.3% for single fund and 0.4% for multi-fund.

MBH
Duration: 5.70
Yield-to-Maturity: 3.62%
Average credit rating: A

Source: https://www.nikkoam.com.sg/media/pdf/fund/factsheet/Nikko AM SGD Investment Grade Corporate Bond ETF Factsheet.pdf

Total expense ratio: 0.26% (from NikkoAM website)

 

[peachmouse]

If yield-to-maturity falls below 3% for MBH (and its alternatives), it may be worth just leaving the funds in CPF-OA earning 2.5% instead and not risk having falling bond prices when you need the money.

 

[CaptainWu]

MBH share price is doing pretty well recently and yield keeps decreasing, based on end Aug factsheet I have calculated current yield at 3.35%, more or less same as the high interest accounts like EGA, eSaver...etc. Given that bank's interest is decreasing also and if they go in par probably still worth to keep. Yield dropping to 3% still have 10% upside and close to ATH.

 

[BBCWatcher]

MBH share price is doing pretty well recently and yield keeps decreasing, based on end Aug factsheet I have calculated current yield at 3.35%, more or less same as the high interest accounts like EGA, eSaver...etc. Given that bank's interest is decreasing also and if they go in par probably still worth to keep. Yield dropping to 3% still have 10% upside and close to ATH.

That’s exactly what a bond fund is supposed to do. And why dollar cost averaging across interest rate cycles works well.

 

[sohguanh]

MBH share price is doing pretty well recently and yield keeps decreasing, based on end Aug factsheet I have calculated current yield at 3.35%, more or less same as the high interest accounts like EGA, eSaver...etc. Given that bank's interest is decreasing also and if they go in par probably still worth to keep. Yield dropping to 3% still have 10% upside and close to ATH.

Actually not unique to MBH if you invest all over the place like me as of current in general bond fund,ETF all doing very well (capital gain) so not only MBH.

 

[DevilPlate]

Actually not unique to MBH if you invest all over the place like me as of current in general bond fund,ETF all doing very well (capital gain) so not only MBH.

MBH etf make it simpler to track yr SGD fixed income portfolio lah….rather than peanuts everywhere

 

[DevilPlate]

That’s exactly what a bond fund is supposed to do. And why dollar cost averaging across interest rate cycles works well.

MBH average duration around 5yrs right?
So need to analyse whether their underlying bonds maturity dates are evenly spread out?

*one lump sum purchase at near recent lows better?
Stocks harder to time the market but bonds easier just based on interest rate cycle?

 

[sohguanh]

MBH etf make it simpler to track yr SGD fixed income portfolio lah….rather than peanuts everywhere

Peanuts based on your own definition of cuz is peanuts.

 

[DevilPlate]

Peanuts based on your own definition of cuz is peanuts.

don’t over-diversify….maybe u are addicted

 

[s0crates]

MBH share price is doing pretty well recently and yield keeps decreasing, based on end Aug factsheet I have calculated current yield at 3.35%, more or less same as the high interest accounts like EGA, eSaver...etc. Given that bank's interest is decreasing also and if they go in par probably still worth to keep. Yield dropping to 3% still have 10% upside and close to ATH.

BBGA, in sgd terms, is doing even better.

https://endowus.com/investment-funds-list/amundi-index-global-agg-500m-fund-LU2420245834

Good for those that pick the more diversified version. Diversification truly is the only free lunch in the world.

 

[CaptainWu]

BBGA, in sgd terms, is doing even better.

https://endowus.com/investment-funds-list/amundi-index-global-agg-500m-fund-LU2420245834

Good for those that pick the more diversified version. Diversification truly is the only free lunch in the world.

MBH is more for my local/regional exposure as I think it makes sense for me to have a certain portion. I do have AGGU also as part of my global exposure which is similar to BBGA. Yes diversification works for me!

 

[BBCWatcher]

BBGA, in sgd terms, is doing even better.
https://endowus.com/investment-funds-list/amundi-index-global-agg-500m-fund-LU2420245834

No, I don’t think so. I think you have it backwards. Double check your math, dates, exchange rates, and Endowus fee.

That Amundi fund reports a 10.75% annualized return through September 30 in U.S. dollar terms. Nikko AM has not yet posted MBH’s annualized return through September 30 — which would include the important month when the U.S. Federal Reserve lowered interest rates. MBH’s annualized return through August 31 was 7.74% in Singapore dollar terms. It had a substantial gain in September. MBH’s closing price on the last day of trading in August was S$0.978, and its closing price on the last trading day of September was S$0.994 (+1.64%).

Here are the USD-SGD exchange rates courtesy OandA.com…

September 30, 2023: 1.3646
September 30, 2024: 1.28077 (-6.14%)

So there you go. MBH thumped that Amundi bond fund over this time period.

Good for those that pick the more diversified version. Diversification truly is the only free lunch in the world.

There’s more than adequate diversification in MBH for the purposes it serves.

 

[BBCWatcher]

To elaborate, I have nothing specifically against global bond index funds. I suggest CRPA from time to time in this role — a better choice for long-term cash investing (0.20% expense ratio, lower than what Endowus and Amundi charge combined). But a global bond index fund (i.e. a fund holding a portfolio of bonds denominated in various currencies) serves a very different purpose compared to a Singapore dollar bond index fund (a fund holding a portfolio of bonds denominated only in Singapore dollars).

 

[Listopad]

That’s exactly what a bond fund is supposed to do. And why dollar cost averaging across interest rate cycles works well.

Say if one has their cpf oa vested in MBH . When the rates drop further say YTM of mbh dips to 2.8% , would it then make sense to sell MBH (realize the gains so far) and return funds back to OA at 2.5% instead of dollar cost avg through cycles ?

qn is purely for understanding of mechanics of YTM, how we can perhaps maneuver between ‘risk free’ vs yield pickup (not to complicate with retirement /needs or nuances of how cpf calculate their interest for the months, etc).

 

[Listopad]

To elaborate, I have nothing specifically against global bond index funds. I suggest CRPA from time to time in this role — a better choice for long-term cash investing (0.20% expense ratio, lower than what Endowus and Amundi charge combined). But a global bond index fund (i.e. a fund holding a portfolio of bonds denominated in various currencies) serves a very different purpose compared to a Singapore dollar bond index fund (a fund holding a portfolio of bonds denominated only in Singapore dollars).

But CRPA is not hedged to sgd …. Would your view differ for global bond funds that are hedged to sgd say the likes of following ？
https://endowus.com/investment-funds-list/dimensional-global-core-fixed-income-fund-IE00BG85LQ14

 

[sohguanh]

Say if one has their cpf oa vested in MBH . When the rates drop further say YTM of mbh dips to 2.8% , would it then make sense to sell MBH (realize the gains so far) and return funds back to OA at 2.5% instead of dollar cost avg through cycles.

Not really answer your question but another question. Suppose you really sell and return back to OA have you thought of how to redeploy that amount of monies unless you have reached the age to withdraw cpf monies out?

 

[BBCWatcher]

Say if one has their cpf oa vested in MBH . When the rates drop further say YTM of mbh dips to 2.8% , would it then make sense to sell MBH (realize the gains so far) and return funds back to OA at 2.5% instead of dollar cost avg through cycles ?

No, because how do you know that’s at or near a bond market peak?

Don’t invest OA dollars with the intention of trying to time markets. If you’re content with 2.5%, take that. (With possible T-bills during higher interest rate periods.) If you’re not content with 2.5%, and want a long- term investment, stick with that. Trying to hop in and out probably isn’t going to work.

But CRPA is not hedged to sgd …. Would your view differ for global bond funds that are hedged to sgd say the likes of following ?

Not when MBH exists, nope. Hedging only moderates currency drift. It doesn’t eliminate it. And you don’t want to incur the direct or indirect cost of currency hedging in a long-term vehicle anyway. If you’re betting on foreign currency bonds, bet on foreign currency bonds.

 

[s0crates]

No, I don’t think so. I think you have it backwards. Double check your math, dates, exchange rates, and Endowus fee.

That Amundi fund reports a 10.75% annualized return through September 30 in U.S. dollar terms. Nikko AM has not yet posted MBH’s annualized return through September 30 — which would include the important month when the U.S. Federal Reserve lowered interest rates. MBH’s annualized return through August 31 was 7.74% in Singapore dollar terms. It had a substantial gain in September. MBH’s closing price on the last day of trading in August was S$0.978, and its closing price on the last trading day of September was S$0.994 (+1.64%).

Here are the USD-SGD exchange rates courtesy OandA.com…

September 30, 2023: 1.3646
September 30, 2024: 1.28077 (-6.14%)

So there you go. MBH thumped that Amundi bond fund over this time period.

There’s more than adequate diversification in MBH for the purposes it serves.

You are absolutely right. I should have quoted the sgd fund.

The sgd hedging helps, we are looking at 1 year returns of 7.74%p.a. for MBH versus 8.61%p.a. for Amundi BBGA.

Even if you add in endowus fees, AMUNDI BBGA will do better.

Oh have we forgotten that the MBH returns are not so great if you have to take into account dividend reinvestment and the associated cost from it?

https://endowus.com/investment-funds-list/amundi-index-global-agg-500m-fund-LU2420246212

Singapore's monetary and fiscal policy is very soundly run. For now. But let's see how things go in the next 20-30 years with our ageing population, uncompetitive wages and export driven economy and big local players.

Would big Singapore players still issue debt instruments? Would they still be big?

Would foreign companies even bother issuing sgd debt?

Maybe later on I won't even bother holding sgd hedged/denominated assets tbh.

I just hope they allow me to even invest the remaining 60k in my SA/OA if things are that dire then.

 

[Listopad]

No, because how do you know that’s at or near a bond market peak?

Don’t invest OA dollars with the intention of trying to time markets. If you’re content with 2.5%, take that. (With possible T-bills during higher interest rate periods.) If you’re not content with 2.5%, and want a long- term investment, stick with that. Trying to hop in and out probably isn’t going to work.

I find it hard to jive on one not switching out mbh to cpf oa rate in the event if rates drop to 2.5% given latter is risk free. In addition if ytm at 2.5%, even if bond market not at its peak , there’s not much to lose out on?

 

[Listopad]

Not when MBH exists, nope. Hedging only moderates currency drift. It doesn’t eliminate it. And you don’t want to incur the direct or indirect cost of currency hedging in a long-term vehicle anyway. If you’re betting on foreign currency bonds, bet on foreign currency bonds.

Thanks for the inputs . That’s on point .