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OCBC launches hybrid unit trust, combining fixed maturity product with call option strategy
OCBC Bank and Lion Global Investors have launched what they say is a first-of-its kind unit trust in Singapore for the bank's retail customers, that combines a fixed maturity product and potential capital gains though a call option strategy.
The Lion-OCBC Global Income 2021 Fund will invest in a diversified portfolio of global bonds with an average investment-grade rating and targeted maturity of three years.
It promises a pay out of at least 9 per cent, broken down into 3.5 per cent per annum in Year 1, 4.0 per cent per annum in Year 2, and a variable distribution with a minimum of 1.5 per cent per annum in Year 3.
The annual management fee for the product is 1.2 per cent per annum in Year 1, 0.8 per cent per annum in year 2, and 0.4 per cent per annum in year 3, after a 0.1 per cent rebate on an semi-annual basis. The one-time sales charge is up to 3 per cent at the point of sale.
Ms Tan Siew Lee, head of wealth management Singapore at OCBC Bank, said, "This fund incorporates all three desires of our customers – quarterly fixed pay outs of at least 9 per cent over three years, downside protection as long as the underlying bonds do not default, and potential capital appreciation through exposure to a multi-asset allocation across a range of bond and equity Exchange Traded Funds (ETFs)."
She added: "This product is especially appealing for customers who do not want exposure to a single bond, as it provides diversification across a portfolio of global bonds with an average investment-grade rating. The short tenure of three years also mitigates the interest rate risk and will appeal to investors who do not have a long investment horizon, and want regular income."