Official Shiny Things thread Episode V, The Empire Strikes Back

[KinoChoco]

Hi Shiny Things & BBC

Do you have any comments on ‘AIAI’?
I already currently have quite a significant % on VWRA, I was thinking of adding something more towards new business initiatives (AI, robot, semiconductors, quantum computing etc)

Do you think getting 10-15% into AIAI would be a decent idea? Or do you think there’s better alternative? PS: I’ve never heard of anything mentioning AIAI in SG, hence having some doubts on it.

 

[threestageleastsquares]

Currently I'm sitting on a couple of LSE-listed ETFs. You know the ones.

The usual go-to candidates for obtaining index-like tracking for CPFIS is the unit trust Amundi Prime USA. For SRS funds, the BlackRock iShares US Index Fund ETF is available for tracking via Endowus. If limited to SGX-listed funds, SPDR S&P 500 trades in SGX under the ticker S27, albeit it is a US-domiciled fund and so is subject to higher dividend withholding taxes.

I have a sorta different question though: for the purpose of MAS Notice 645 on TDSR calculation of unpledged assets, as amended, the requirements are

19. The eligible financial assets of the Borrower referred to in paragraph 17(e) are as follows:

(a) liquid assets comprising Singapore dollar notes and coins (including deposits); and​

(b) the following assets:​

(i) units in a collective investment scheme authorised or recognised by the Authority under the Securities and Futures Act 2001;​

(ii) units in a business trust registered with the Authority under the Business Trusts Act 2004;​

(iii) debentures or stocks issued or proposed to be issued by a government;​

(iv) debentures, stocks or shares issued or proposed to be issued by a corporation or body unincorporated;​

(v) structured deposits,​

(vi) foreign currency notes and coins (including deposits); and​

(viii) gold,​

which have a secondary market or have a reasonable basis for valuation, and to the extent that the asset is unencumbered.

21. Where the liquid assets (referred to in paragraph 19(a)) of a Borrower are not pledged with a bank to secure the credit facility or the Re-financing Facility referred to in paragraph 3, or paragraphs 6(a), (b), (c) or (d), the bank must ensure that the liquid assets are residing in the Borrower’s account with a financial institution regulated by the Authority before the funds are disbursed under the above-mentioned credit facility.

... which raises the interesting question, has anyone figured out what is the optimal instrument for index tracking that meets this criteria? To in effect take advantage of the relative cheapness of mortgage leverage (relative to tying up your funds in an FD as a pledged asset)

 

[Shiny Things]

Hi Shiny Things & BBC

Do you have any comments on ‘AIAI’?

Yeah. I think about this the same way I think about a lot of other thematic ETFs: these are not about delivering good returns for investors, they're about gathering more assets and charging higher fees for the fund-management company. ETF companies (well, the less customer-oriented ones) love launching ETFs based on every new retail-investment trend, in the hope that one takes off and makes the fund sponsor a ton of money.

Sometimes these thematic ETFs catch on—for example, the JP Morgan option-selling ETFs rode the option-selling trend to make humongous amounts of money for JPM, despite JEPI getting soundly thrashed by SPY over the last one, three, and five years (as well as getting entertainingly front-run by every option hedge fund on the street).

And sometimes they don't catch on. My absolute favorite failed ETF is the KPOP ETF, which launched in the midst of the Kpop boom of 2022 (Born Pink!* BTS members headlining Lollapalooza and the World Cup!) and unceremoniously shut down and returned money to investors earlier this year after losing 30% in the intervening three years. Whoops.

All that is to say that if you're thinking of buying a thematic ETF because you've seen a trend on the news, it's almost always a bad idea.

*Pink Venom was an absolute banger, am I right?

Currently I'm sitting on a couple of LSE-listed ETFs. You know the ones.

... which raises the interesting question, has anyone figured out what is the optimal instrument for index tracking that meets this criteria? To in effect take advantage of the relative cheapness of mortgage leverage (relative to tying up your funds in an FD as a pledged asset)

So I don't actually know anything about this, but from my reading of the MAS notice, this seems to be entirely up to the lender.

Paragraph-19 assets are the assets that count toward your gross monthly income per paragraph 17(e), but footnote 10 to paragraph 17 says "in determining the gross monthly income of a Borrower, all or any part of [...] value of the eligible financial assets referred to in paragraph 17(e) may be excluded".

That throat-clearing aside, the list of "collective investment scheme authorised or recognised by the [MAS] under the Securities and Futures Act 2001" would be the ones down the bottom of this page; but, like I said, it seems like the notice gives the lender discretion as to whether they count these assets as part of your income or not.

 

[threestageleastsquares]

Oh, yes, there's no obligation on lenders to accept all assets - this list only constrains what they can accept.

In discussion with some mortgage teams, some are conservative but others are more free-for-all.

That still leaves open the question of: assuming the lender does accept anything meeting the criteria, what's the best low-fee broad-market fund meets those criteria?

 

[Shiny Things]

That still leaves open the question of: assuming the lender does accept anything meeting the criteria, what's the best low-fee broad-market fund meets those criteria?

Hold on, I'm a little confused here; I need a little more before I can give you a meaningful answer. What exactly are you trying to do; why don't the lender's standards matter; what index are you trying to track? That sort of thing.

 

[threestageleastsquares]

The lender's standards matter less because there's multiple banks who will lend at roughly similar rates, so if one has conditions you can just talk to another. MAS does set a limit around what the lender can accept though, so you can't go outside that fence.

As funds go, US large caps is a must... Small caps or more world exposure is nice to have (if the inevitable increase in expense ratio is small). Amongst Singapore-listed funds I get the impression that one can't really be picky though (anyone have a TER below 0.5%...?).

 

[Shiny Things]

The other thing I'm confused about, though, is why does this matter? Are you trying to juice the amount that banks will lend for a mortgage? It might be just that it's early morning over here and the cappuccino hasn't hit my system yet, but I don't quite understand the "why" behind your question—even if I'm understanding it right, this feels like a third- or fourth-order optimization.

 

[ExEngineer]

Hi all,

Bond ETF question - what’s the current going recommended counter for investment-grade corporate bond ETF, assuming non-US person, middle-aged Singapore resident (retirement location undetermined but likely significant SGD & USD expenses over next ~20yrs)?

Ive paid very little attention to bondholdings given I tend to view CPF SA/RA as well as owner-occupied property as “bond-like”; while the liquid portions of my investments are heavily skewed into equity ETFs.
But in a rebalancing exercise I’m contemplating increasing some amount of liquid allocations into a high grade corp bond ETF.

 

[highsulphur]

Hi all,

Bond ETF question - what’s the current going recommended counter for investment-grade corporate bond ETF, assuming non-US person, middle-aged Singapore resident (retirement location undetermined but likely significant SGD & USD expenses over next ~20yrs)?

Ive paid very little attention to bondholdings given I tend to view CPF SA/RA as well as owner-occupied property as “bond-like”; while the liquid portions of my investments are heavily skewed into equity ETFs.
But in a rebalancing exercise I’m contemplating increasing some amount of liquid allocations into a high grade corp bond ETF.

For sgd, can consider MBH

 

[ExEngineer]

For sgd, can consider MBH

Have some small qty MBH holdings from a long time ago.

Wondering if better to start allocating into that, or go for something a bit more broad based vs only SGD/Singapore.

 

[BBCWatcher]

Bond ETF question - what’s the current going recommended counter for investment-grade corporate bond ETF, assuming non-US person, middle-aged Singapore resident (retirement location undetermined but likely significant SGD & USD expenses over next ~20yrs)?

Have some small qty MBH holdings from a long time ago.
Wondering if better to start allocating into that, or go for something a bit more broad based vs only SGD/Singapore.

It's up to you, really.

CRPA is a popular low cost, accumulating, global, investment grade, corporate bond index fund, listed/traded on the London Stock Exchange. If you're concerned that something "weird" could happen to the Singapore dollar (and to MBH for example), and/or if your retirement will be lived somewhat or very internationally, CRPA seems like a reasonable choice in some measure.

I'll also mention IGIL, a popular low cost global sovereign real return (inflation indexed) bond index fund. IGIL can be useful as long-term protection against inflation shocks if that's what worries you. Personally I think that's too complicated, that "a couple" funds is enough. (IGIL might be part of a "5 fund strategy.") But YMMV.

Or conceivably you could invest in individual bonds, construct your own "laddered" bond portfolio, and (typically) hold bonds to maturity. However, that approach requires a substantial capital sum to get going, individual bonds are not terrifically liquid, and unless the portfolio is rather large you'd get pretty badly hit if even one bond defaults. It's somewhat easier if you just want some U.S. Treasuries since that segment of the bond market is relatively big and offers smaller increments.

 

[Shiny Things]

Hi all,

Bond ETF question - what’s the current going recommended counter for investment-grade corporate bond ETF, assuming non-US person, middle-aged Singapore resident (retirement location undetermined but likely significant SGD & USD expenses over next ~20yrs)?

Ive paid very little attention to bondholdings given I tend to view CPF SA/RA as well as owner-occupied property as “bond-like”; while the liquid portions of my investments are heavily skewed into equity ETFs.
But in a rebalancing exercise I’m contemplating increasing some amount of liquid allocations into a high grade corp bond ETF.

MBH is still the go if you want SGD corps; I prefer LQDA over CRPA for USD corps, because CRPA owns bonds in every currency, which might be a little wider than you want.

That said, investment-grade corporate bonds are quite remarkably expensive relative to govvies right now, right across the world—the premium you're earning for taking IG corporate default risk is smaller than it's been for a long time. At these levels, I wouldn't judge anyone who leaned toward government bonds at this point (A35 for SGD, GOVT (in Amsterdam) for USD), even though their yields are lower than corporate bonds.

(edited to clarify: investment-grade spreads, specifically, are at their tightest in years. High-yield spreads are also optically very tight, but a big part of that is just because the average high-yield bond is a lot less crappy these days.)