Question

Go to the dollarDex website and under the tab “Tools” click on “Fund Finder”. Under “Fund

manager”, choose “UOBAM”. Then click on the “Advanced” tab and under “Payment

Currency”, select SGD.

Focus on the following four funds:

• Cash Management – UOBAM United SGD Money Market Fund – Class A1 SGD

• Equity – UOBAM United Asia Fund

• Bond – UOBAM United Asian Bond Fund

• Balanced – UOBAM Growth Path 2030

(a)

For each fund, indicate the level (low, medium, high) for the risk and the return

characteristics and discuss your choice. Discuss the investment attractiveness of the

fund. Use the format below to answer your question:

Example:

(Type) Fund – (Fund Name)

(i) Risk: Low/Medium/High

(choose one)

Reason: (explain using theory as well as data from the website)

(ii) Return: Low/Medium/High (choose one)

Reason: (explain using theory as well as data from the website)

(iii) Investment attractiveness

(discuss the type of economic condition for which this type of fund is most

suitable)

(b) Discuss which fund would be most suitable for a relatively young graduate who has

been working for 3 years since graduation.

Answer 1

Answer to Que (a)

Fund - Cash Management – UOBAM United SGD Money Market Fund – Class A1 SGD

(i) Risk: Very Low

Reason: Since the money is invested in the money market which involves Government Bonds, Treasury Bills. Such funds fall under liquid category and under Low Risk Zone.

(ii) Return: Very Low

Reason: Such funds offers highest liquidity and low risk and provides limied returns only

(iii) Investment attractiveness: Investor having very short term liquidity (up to 90 days) prefers to invest in such Funds

Fund - Equity – UOBAM United Asia Fund

(i) Risk: High

Reason: Funds are invested in the Equity market which is most risky and volatile across the four category. The market is driven by the Economic and Social Sentiment and very highly affected with slight changes in Socio-Economic Conditions.

(ii) Return: High

Reason: With high risk rating, such funds provides highest return across all the funds. In long rung return ranges very high.

(iii) Investment attractiveness: Such Funds are more attractive to the long term investors. Also, the investor who would like to take higher risk to earn high return.

Also, short term investor who want to make small profits with the market movements due to change in the socio-economic conditions.

Fund - Bond – UOBAM United Asian Bond Fund

(i) Risk: Low

Reason: Bond Funds involves the investment in the Debt Fund. If a company defaults in the repayment then Debts get priority in the payment over the equity. Hence the risk level of such funds are less.

(ii) Return: Low

Reason: With low risk, such funds offers low and rather fixed return to the investors.

(iii) Investment attractiveness: Such Investment attracts investor who wants fixed return at low risks, like senior citizens.

Fund -  Balanced – UOBAM Growth Path 2030

(i) Risk: Medium

Reason: This Balanced Funds involes Balanced investment in Debt and Equity. Hence it average outs the high risk or Equity and Low Risk of Debt/ Bond Funds.

(ii) Return: Medium

Reason: Along with the risk, this funds average outs the high return of Equity and low return of Debt Funds. Hence it offers medium return.

(iii) Investment attractiveness - Such funds attracts to those investors who would like to earn on market volatality and also wants some fixed return.

Answer to Que (b)

The most suitable for a relatively young graduate who has been working for 3 years since graduation -

Balanced – UOBAM Growth Path 2030 is the most suitable to the young gratuate, since he wants some handsome return over his funds with less risk. Such funds balances risk as well as returns.

He should not invest in Bond Fund which gives very less return.

Also, he should not choose Equity Funds which has very high risk, since he may need funds in the short terms.