may be the dominant players in the U.S. fund market, but they are underdogs in Singapore. In fact, each of the two fund giants is trying out a different way to crack the island market reports Reuters
The Singapore fund market is currently dominated by a quartet of banks. On the local side are DBS Group and United Overseas Bank. The pair offers some 400 funds with about $9.28 billion in assets. Foreign banks with a presence in the market include both Standard Chartered Bank
and U.S.-based Citigroup
To break into the market, Vanguard plans to rely on its skills and heft as a passive manager. It will also limit its sales efforts to institutions. That way it will be able to minimize the distribution hurdle that it faces in the new market. While Vanguard primarily sells it funds though direct channels in the U.S., most Singaporean investors purchase funds through advisors.
"The retail market is very oversupplied and the banks have taken control of most of the distribution," Jon Robinson
, managing director of Vanguard Investments Singapore Ltd. told Reuters. "The costs of setting up a direct to customer retail business would effectively prohibit Vanguard from selling its low-cost products to Singapore," he said.
Fidelity, on the other hand, is not afraid to go directly to the consumer and steer around banking partners. It has gained approval to sell 33 international funds in the Singapore market and plans to use its economies of scale to undersell other fund firms.
"I'm not saying we are going to take gigantic market share. But, on a level playing field, we have an advantage over 70-80 percent of the funds," Andrew Jenkins
, country head of Fidelity's Singapore operations told the news agency. "One thing we can be pretty sure of is that within the next two to three years, funds for a number of reasons will be a lot cheaper in Singapore," he said.
Jenkins said that Fidelity is also hoping to build the market for equity funds on the island. Most funds currently fall in the guaranteed category.
Both Fidelity and Vanguard may be able to find an opening by stressing low fees. Fund expense ratios in Singapore now average 200 basis points or more, according to Reuters.
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