Robo portfolios may move needle on high fund fees in Singapore

INVESTMENT funds have been available in Singapore for roughly three decades or longer, yet their costs remain stubbornly high.

A biennial study by Morningstar published earlier this year gave Singapore a "below average" grade in terms of fees and expenses, unchanged from its study two years ago. This means funds available for sale in Singapore carry higher fees and expenses due to sales charges and the limited availability of retrocession-free fund share classes, among other factors. "It is possible but rare for investors (in Singapore) to pay for advice other than through commissions or retrocessions," said Morningstar.

Singapore's median asset-weighted fund expenses are not the highest in the list of 26 markets. The median fee for equity funds is estimated at 1.89 per cent, for asset allocation funds 1.54 per cent, and for fixed income funds 1.41 per cent. Based on Morningstar's compilation, Singapore fees are comparable to Taiwan's which earned a "bottom" rating. But the median fixed income fees are somewhat startling. At a time when global bond yields are depressed, how are investors going to achieve returns when fees are akin to those for equity funds? In comparison, the total expense ratio cap imposed by the CPF Investment Scheme for fixed income funds - generally classified as low to medium risk - is 0.98 per cent. The median fee for fixed income funds in China is 0.44 per cent, and in India 0.54 per cent.