If you are a regular commuter on the MRT, no doubt you would have noticed the endless advertisements that are put up by Aberdeen Asset Management.

To be honest, when I just started getting interested in the topic of investment, I was interested in what Aberdeen had to offer. After all, there are the “experts/professionals” who knew how to invest, and what to invest in.

Luckily, I took my time to learn more about investing and to do my homework. What I found out pretty much scared me away from them, and I wouldn’t even go near them ever again.

Let’s take a look at a recent ad they placed inside MRT cabins which promoted the Aberdeen European Opportunities Fund.

Aberdeen European Opportunities Fund

I navigated to their website and pulled the fund factsheet here. Let’s take a look a few pieces of important information listed inside.

  • Management Fee : 1.5% per annum. Wow, regardless of fund performance they are going to charge me 1.5%? Great way to earn (my) money!
  • Front-end Load : 5.0% (Cash/SRS) 3.0% (CPFIS-OA). *cough* Taking another HUGE hit even before my fund earns me anything. However, do note that this is the maximum-chargeable amount. E-Platforms such as Fundsupermart would typically have the lowest front-end or sales charge compared to banks, for example.

In this May 2014 Straits Times article, it was stated that :

So far, those CPF members who have risked their savings have not done very well. Almost half of CPFIS-OA investors (47 per cent) incurred losses on their investments between 2004 and 2013, while 35 per cent obtained net profits equal to or less than the default OA rate of 2.5 per cent. Only 18 per cent made net profits in excess of the OA interest rate.

It is pretty obvious to me that with this type of crappy unit trusts being made available under the CPFIS-OA investment scheme, of course the performance is going to be impacted negatively. You might be better off leaving your money in CPF to earn the risk-free interest. How are funds deemed to be allowed to be invested with our CPF money?

To throw salt on your wound, the fund factsheet outrageously included a performance chart (Percentage Growth Total Return) which compared the fund [33.8] against the benchmark [64.2]. It’s like saying – “See? Our fund’s performance is inferior to the benchmark. Invest with us anyway!”.

What could you have done differently? You might have been better off investing in Vanguard’s FTSE Developed Europe Index ETF (3101) that is listed on Hong Kong’s stock exchange. Expense ratio is lower, and returns is higher.

  • Total expense ratio : 0.25%
    (includes management fee and all costs and expenses connected with the management and operating activities of the Fund)

This is a perfect example of two very different investment management companies – one of which place your interests as the top priority.

Very often, I think of the reason behind such irrationality. Why would people be willing to accept such a bad deal? Perhaps it is the lack of knowledge regarding the availability of alternatives, such as index funds/ETFs? Thinking back to the start of my post, I was the very layman on the street who would have invested with Aberdeen if not for my interest in finding out more.

If you had the choice, which investment company would you prefer?

I must state that this is only a single unit trust / mutual fund we are looking at. There will be funds that beat the indexes, and there will be funds that lag behind benchmarks. The key is to learn to read beyond the rosy pictures painted by advertisements.