New Shariah Compliant Investment Products From BIBD Security
Hello there! It’s been so long since I last blogged about investment related stuff for the average Bruneian!
On 19 September 2020, BIBD has launched two new Shariah Compliant Investment Products. These are nice options for those who are concern with the Halal-ness of their investments! I will link the Borneo Bulletin article and some other resources by the end of this article!
In this article, I will just share some of my thoughts and simple analysis as an average investor. I have gone through the factsheet and the products’ information from Bloomberg. But before I proceed, it’s important for me to put out this disclosure first.
This article is strictly my opinion and knowledge about investment. This article is not meant to be taken as a financial advice. I’m not a professional so please get your financial advice from professional. Investment is risky and you may lose your money or even lose all of your money. Take this article with a pinch of a salt and take your due diligence before your commit to investment.
Now that I am somewhat protected, let us proceed.
The two products which BIBD has launched are managed by a fund house called Franklin Templeton. We also can see this fund house’s products offered by other local banks; Baiduri Capital and Standard Chartered. I even have one from Baiduri Capital which I purchase a year ago.
Both of the products are Mutual Funds (also called Unit Trust) which means, when you invest your money into either of these funds, you are trusting your money to fund manager (a human) to invest your money into several paper assets (stocks, bonds, etf, REITs, etc). In return, the fund house will take a small cut from your investment for their service in managing your investment.
Both of these products are quite different from each other, and each might attract different kinds of investors with different risk tolerance. Let’s look into them a bit deeper!
Franklin Global Sukuk Fund
Based on the fact sheet, this Mutual Fund is consist of around 85% bonds and around 15% cash. Even though the risk level of this fund can’t be found anywhere in Bloomberg, in the factsheet, or in the official website, I personally think this fund is generally safe to invest, as in general, bonds are less risky to invest compare to other kinds of paper assets.
You can see below all of the bonds invested in this Mutual Fund:
If you are looking for fixed incomes (dividend), this fund is also might be suitable for you. As it promises a monthly dividend pay-out. This is also confirmed in the Borneo Bulletin article.
How much is the dividend? I will attempt to estimate how much is the monthly dividend you would earn if you invested B$ 1,000.
Price per unit (as of 31/8/2020): SGD 10.00
Units obtained: 100 units
Latest pay-out per unit (as of 17/8/2020): SGD 0.0370
Hypothetical dividend: SGD 3.70
I’m guessing you would get around at least SGD ~3.00 to at most SGD ~4.00 in the first two years of you investing into this product. Note that I got the above numbers from the factsheet.
Based on the information that I got from Bloomberg, this fund pays its investor around 4% annually on average, so that translated around SGD 40 in your first year.
If you are interested to see information from third party sources, you can check below:
I’m assuming BIBD has the reinvestment option, so that the moment the dividend comes out, it is automatically used to purchased new units. If BIBD offers this option, I recommend you to take this option as you would get more units from the reinvestment thus helping you to earn more dividend in the long run. This is what we call as Compounding. In fact, don’t even bother taking out your money in 30 years. Let it grow until you retire.
The fund is also performing well for the past 5 years as it averages around 4% growth annually. I̶f̶ ̶m̶y̶ ̶m̶a̶t̶h̶ ̶i̶s̶ ̶n̶o̶t̶ ̶b̶r̶o̶k̶e̶n̶,̶ ̶t̶o̶t̶a̶l̶i̶n̶g̶ ̶u̶p̶ ̶t̶h̶e̶ ̶d̶i̶v̶i̶d̶e̶n̶d̶ ̶a̶n̶d̶ ̶t̶h̶e̶ ̶f̶u̶n̶d̶ ̶g̶r̶o̶w̶t̶h̶,̶ ̶i̶n̶v̶e̶s̶t̶o̶r̶ ̶s̶h̶o̶u̶l̶d̶ ̶b̶e̶ ̶g̶e̶t̶t̶i̶n̶g̶,̶ ̶i̶n̶ ̶t̶h̶e̶o̶r̶y̶,̶ ̶a̶r̶o̶u̶n̶d̶ ̶4̶ ̶t̶o̶ ̶8̶%̶ ̶a̶n̶n̶u̶a̶l̶l̶y̶.̶ ̶D̶o̶n̶’̶t̶ ̶q̶u̶o̶t̶e̶ ̶m̶e̶ ̶o̶n̶ ̶t̶h̶i̶s̶ ̶t̶h̶o̶u̶g̶h̶.̶
Edit: I just found out the Annualised Return includes profit earned from capital gain and dividend. So as for this fund, its 5-years annualised return of 4% is most likely come from the dividend.
There are three classes available for this product: USD (without dividend), SGD (with dividend), USD (with dividend). Don’t stress too much on this though, the salesperson most likely would recommend you the SGD class.
Moving on!
Templeton Shariah Global Equity Fund
Unlike the previous fund, this fund is totally opposite! It is around 95% equity and around 5% cash, which means this fund is an equity fund, which also means this fund is investing in companies’ stocks and shares. Again, I can’t seem to find the risk level for this fund anywhere in the Internet, but in general, equity fund is high risk and it is for those savages who have heart of steel. It’s not that bad though, some equity funds do produce great result, though I’m not sure about this particular fund.
You can see the top ten companies invested in this Mutual Fund:
Unlike the previous fund, this fund does not give out any dividend to the investor. So the only way you can make money out of this fund is to sell this fund when the fund’s price is higher than the price you purchased this fund (actually a bit more complicated, will explain later).
This fund is also more expensive, as the NAV (price per unit) is SGD 12.56 as of 31/8/2020, which means, SGD 1,000 can get you 79.6 units.
Let’s talk about the fund’s performance. As a beginner, layman, newbie investor, I don’t really like how the fund has performed for the past years so far.
As you can see, the numbers are quite disappointing compare to the numbers that we saw for the previous fund. The 5-years annualised return of 2% is not that worth it (IN MY OPINION) when you factor in the management fee, which I will explain later on.
I don’t really have anything much to say about this fund anymore, so let us move to BIBD Security services.
BIBD Security (BIBDS) Mutual Fund Service
When you visit BIBD Security’s website, you can see that BIBDS offers:
- Brokerage Services — I’m guessing it’s an online platform where you can buy and sell stocks, etfs, bonds, etc on your own. If you familiar with forex, probably it is similar to MT4 where you can buy and sell currencies on your own. From their Schedule if Tarriffs, it seems like you can only buy BIBD shares, Malaysian and Singaporean papers assets. If there was no online platform, you would probably have to buy these assets over the counter.
- Mutual Funds — The things that we just talked previously. BIBDS also offers other Mutual Funds from different fund house, but it is not the focus of today’s article.
Now I want to bring your attention to the Tariffs for their Mutual Fund service. Please look at the following:
What does this mean?
Let’s say you want to invest SGD 1,000 to one of the fund. I’m not sure how BIBDS will carry out the sales charge, but I can share with you how Baiduri Capital carry out their charges, and I’m guessing it’s similar.
Baiduri Capital actual sales charge is 4% (as of August 2019), but for simplicity sake, let’s use 5% for the calculation.
- If you want to spend SGD 1,000 for your investment, due to the sales charge, you actually invest SGD 950 as your SGD 50 was taken for the sales charge.
- If you want to invest exactly SGD 1,000 for your investment. You would invest SGD 1,000 and the sales charge will be SGD 52.63 after doing some cross multiplying (didn’t know my math class actually useful). So in the end you would spend SGD 1052.63.
I hope that makes sense, so I think BIBD will do either of the above scenario, although you can specifically tell them you want to spend SGD 1,000 or you want to invest SGD 1,000.
Now what about management fee, also known as Annual Charges? Think of this as you paying your fund manager for managing your money for you. From their respective fact sheet, Franklin Global Sukuk Fund charges the investor maximum 1.30% annually while Templeton Shariah Global Equity Fund charges the investor maximum of 1.50% annually. And this charge will be applied to the investor regardless the fund makes you money, or loses your money in that particular year.
Which One Is Better?
I can’t say for sure which one is better than the other because each of the fund addresses different needs for different types of investors. I’m also aware that past fund’s performance does not reflect to the actual fund’s future performance. It’s possible Templeton Shariah Global Equity Fund rises and provides 10% annual return in the next 5 years. The best thing any investor should do is to diversify their portfolio and in this case, allocate their money into both of these fund or any other paper assets!
Conclusion
Thank you very much for reading this article. I hope this article is clearly explained both of the product well. If it is confusing for you, please don’t be afraid to send me messages in my LinkedIn, I will be happy to explain to you further to the best of my knowledge. Also, do take the content in this article with grain of salt, refer and validate this post to the relevant expert in this field. In the future, I might talk about BIBDS’s new Monthly Investment Programme.
Resources
- BIBD launches two investment products by Borneo Bulletin
- BIBD Mutual Funds
- BIBD Brokerage Service
- Franklin Global Sukuk Fund from Bloomberg
- Templeton Shariah Global Equity Fund from Bloomberg
- Franklin Global Sukuk Fund from Franklin Templeton
- Templeton Shariah Global Equity Fund from Franklin Templeton
Follow Me!
- GitHub (Yes, I’m a programmer!)
- Nextacloud Technologies (I work here!)
- Brunei Speakers Club (Do visit us!)
