Lion-Bank of Singapore Asian Income Fund raises US$126 million in the initial offer period amidst extreme market volatility
Bank of Singapore and Lion Global Investors today announced the successful launch of the Lion-Bank of Singapore Asian Income Fund (“the Fund”). Offered exclusively to Bank of Singapore clients, the Fund offers timely respite to investors looking for steady returns in the midst of market volatility since 2015, which has worsened in the beginning of 2016.
Bank of Singapore raised US$126 million during the 3-week Initial Offer Period (11 January – 2 February 2016) amidst increasing capital outflows globally. Investors were attracted by the Fund’s diversified portfolio of Asian equities and bonds with a covered equity call option strategy and a target distribution 5-6% p.a.
The Fund offers regular income from multiple sources, namely equity dividends, bond coupons and option premium, while still being able to capture growth opportunities and manage risks. The combination of equities and bonds as well as the flexibility to hold cash reduces overall portfolio volatility.
Bank of Singapore is responsible for asset allocation decisions, the equity portfolio construction and implementing the covered call strategy as part of its discretionary portfolio management service, while Lion Global Investors manages the fixed income portfolio.
Mr Marc Van de Walle, Bank of Singapore’s Global Head of Products shared, “2016 saw global markets get off to the worst start in the last two decades. This has naturally left investors quite shaken and asking what they should do to grow their wealth and yet manage risks in order not to lose the value of their assets. This prompted us to tap on OCBC’s strong wealth platform to generate this investment opportunity in line with our long term investment views.”
Case for investing in Asia
The Fund, which invests in Asian equities and fixed income instruments, presents ample opportunities for potential upside, given Asia’s relatively stable macroeconomic outlook and attractive valuations. While China’s reform and economic transition continues, Asia is comparatively strong among emerging economies, with high levels of foreign exchange reserves, limited external debt, undervalued exchange rates and adequate policy flexibility.
Asian equity markets are looking attractive with MSCI Far East Ex-Japan currently trading at multi-year lows of 11x forward P/E (Source: Bloomberg). There are also ample opportunities for income investing, with 29% of Asia Pacific stocks currently offering a dividend yield of 4% or more. Asian bonds proved to be resilient in the market selloff in January and continue to offer higher yields compared to counterparts in the United States and Europe.
Bank of Singapore and Lion Global Investors’ investment expertise
The Fund will benefit from Lion Global Investors’ established track record of holistic coverage of Asian fixed income and equities. Lion Global Investors has one of the largest and most experienced fixed income team in the region with fund managers averaging 24 years of financial industry experience, and having managed investment portfolios through different market cycles. As at 31 December 2015, Lion Global Investors managed over S$26 billion (US$17.9 billion) fixed income investments, making it one of the largest fixed income managers in the region.
Bank of Singapore’s track record and expertise in discretionary portfolio management (DPM) has seen its DPM assets under management (AUM) grow to account for more than 7% of the Bank’s total AUM. Over the market cycles in the past 6 years, its mandates have posted compounded returns averaging 5% annually.
Mr Gerard Lee, Chief Executive Officer of Lion Global Investors, said, “It pays to wait in these uncertain market conditions. For investors seeking some stable sources of income, investing in a balanced, Asian focused strategy will enable them to participate in potential market upsides, while receiving payouts in the meantime.”