fundsupermart offering lets investors trade wholesale bonds in smaller lots

IN A move that could lower risks, fundsupermart is launching a new bond trading platform where investors can trade smaller amounts of bonds that are typically sold only to institutional investors.

The Bond Express platform, which goes live on Thursday, gives investors easier access to bonds, buying in lots of S$5,000 for wholesale bonds or S$1,000 for retail bonds, said Terence Lin, assistant director of bonds and portfolio management at fund researcher iFast. Fundsupermart is a unit of mainboard-listed iFast, an internet-based investment products distribution platform, with assets under administration of about S$6 billion.

Investors can get immediate execution on selected bonds with the platform where they will also see live prices, he said. iFast is the counterparty for the trades; it buys the wholesale bonds which it then makes them available for sale at S$5,000 a pop.

That means accredited investors, instead of investing a minimum amount of S$250,000 in a wholesale bond can now invest with a much smaller S$5,000. Wholesale bonds can only be sold to accredited investors who are individuals with net personal assets of at least S$2 million or annual income of at least S$300,000, or corporations with assets of at least S$10 million.

The new platform plugs a hole in the market and lessens concentration risk, he said.

"It allows them to diversify across a range of names because today anything less than S$250,000 cannot be done," he said.

The platform will start with 17 bonds, comprising 10 wholesale bonds and 7 retail bonds.

The 10 wholesale bonds consist of 5 USD denominated and 5 SGD denominated bonds.

The minimum S$250,000 for wholesale bonds has frustrated many yield hungry investors who find it risky to concentrate their investments in one purchase, which was painfully illustrated by a slew of defaults this year.

Efforts to encourage companies to issue retail bonds have not met with much success; there are 11 retail bonds listed on the Singapore Exchange (SGX) which can be traded in S$1,000 lots. There are more rules governing retail bonds, including the need for a prospectus.

Mr Lin said the retail bonds listed on the SGX often have no liquidity which results in wide spreads.

"We've tried executing (on the SGX) on behalf of clients and experienced this," he said.

Bond Express charges a 0.35 per cent fee for each trade subject to a S$10 minimum.

Fundsupermart currently offers more than 500 bonds to investors; it also provides pricing information as well as research.

The new bond platform is offered on a revamped fundsupermart website. New offerings on the site include a permanent zero charge for all funds and unit trusts. It will continue to charge the annual platform fee of 0.2 per cent.