This post is inspired by the Sunday Times article on 1 Mar 2015, titled "CPFIS-included funds outperformed the STI"
The article compared the performance of CPFIS and ILP funds to the Straits Times Index over a 1 year period. I'm quite sure a longer time horizon will tell a different story.
I went to the source which provided the data (http://www.imas.org.sg/index.php/resources/report) and extracted data all the way back from 1999. Investing (especially for retirement) is for the long term.
To have a fair comparison, I will use the MSCI World Total Returns (TR) as the benchmark (data which the IMAS report provides), as the universe of Unit Trusts and ILP Funds invests in the whole world (Asia, US, Emerging Market etc).
|
3 Year Rolling Total Returns (SGD)
|
Dec-02
|
Dec-05 |
Dec-08 |
Dec-11 |
Dec-14 |
| MSCI World TR USD* |
N.A. |
N.A. |
-31.66% |
25.60% |
60.04% |
| CPF IS Unit
Trust (Equity) |
-40.17% |
74.71% |
-27.68% |
42.73% |
40.11% |
| CPF IS ILP
(Equity) |
-39.47% |
60.60% |
-27.40% |
32.86% |
38.53% |
*Data of MSCI World not available in reports for period 1999-2005
I shall re-arrange data from the above table into the following 2 sections:
I extracted the cummulative yearly returns and summarised them into the following 2 sections:
CPFIS Funds vs ILP Funds vs MSCI World Index
The table and graph below shows the cumulative Total Returns since Dec 2005:
|
Dec-05 |
Dec-08 |
Dec-09 |
Dec-10 |
Dec-11 |
Dec-12 |
Dec-13 |
Dec-14 |
Dec-14 |
| MSCI World TR USD |
100.00% |
114.43% |
68.34% |
87.10% |
89.28% |
85.83% |
94.22% |
124.05% |
137.36% |
| Singapore Straits Times CR |
100.00% |
151.96% |
77.24% |
127.05% |
139.87% |
116.04% |
138.87% |
138.89% |
147.55% |
| CPF IS Unit Trust (Equity) |
100.00% |
137.00% |
72.32% |
107.40% |
114.73% |
99.70% |
112.26% |
127.98% |
139.86% |
| CPF IS ILP (Equity) |
100.00% |
139.03% |
72.60% |
107.41% |
112.74% |
95.39% |
106.79% |
122.61% |
132.03% |
The performance of Unit Trusts and ILP are for the entire universe of equity funds, in the respectively categories. One would achieve the above performance only if one buys the entire basket of equity funds in the respective categories.
On the other hand, one can just buy one (or a few) ETFs directly like the
iShares MSCI World Index ETF, to obtain the equivalent performance of the MSCI World TR performance.
CPFIS Unit Trusts vs ILP Funds
|
Cummulative Total Returns (SGD)
|
|
Dec-99 |
Dec-02 |
Dec-05 |
Dec-08 |
Dec-11 |
Dec-14 |
| CPF IS Unit
Trust (Equity) |
0% |
-40.17% |
34.54% |
6.86% |
49.59% |
89.70% |
| CPF IS ILP
(Equity) |
0% |
-39.47% |
21.13% |
-6.27% |
26.59% |
65.12% |
The performance of ILP Funds trails that of Unit Trusts' in all the 3-year rolling periods where there are gains. In periods where there are losses, the ILP Funds did only slightly better by about 0.3%.
I can conclude that ILP Equity Funds are in general a terrible investment vehicle. The reason behind their sub-par performance might be due to their higher fees or just plain lousy fund managers.
Summary
- The above CPFIS Unit Trusts and ILP Funds have not take into account the effect of sales charges, which is levied every time an investment is made (e.g. monthly for ILP monthly premium payment).
- One can just invest in the World Index to achieve comparable performance to funds managed by "Professional" fund managers.
- The exception might be if one believe in his/her Financial Advisors' forecast which sector will prosper in the next 15 years, and concentrate the investments in the particular sector. Good luck to those who trust these forecasts/predictions.
- ILP Equity Funds greatly underperform Equity Unit Trusts.
