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Providend Limited announces a new global portfolio that aims to offer consistent returns at a controlled level of risk.

As days go by, more active fund managers and financial advisory firms cannot beat the markets with their investments. Even if they do beat the market occasionally, they are unable to do it consistently. Several reports have documented the overall investment climate and most fund managers underperform in their quest to beat the markets over the last 20 to 30 years. Well, what should the investor do? Independent private wealth management firm Providend Limited (Providend) just launched the Providend Global Portfolios (PGP) to give their clients better returns in both higher earnings and cost savings.

Being the first fee–only firm, Providend aims to help their clients lower the cost of investing by presenting a solution involving three global strategies. Namely, the PGP consists of the Global Balanced Strategy, Global Growth Strategy, and Global Retirement Income Strategy.

Providend wants to make a case for change. Their strategy involves lowering costs by using more passive instruments like index funds and Exchange Traded Funds (ETFs), get better rates purchasing through an institutional tranche, diversification and risks management.

Underperforming Equity Markets & the Need for Change

Active managed funds like mutual funds try to beat the markets but usually can’t. Bogle Financial Research Center reported that during a 30 years period (1970 to 1999), out of the 355 equity funds registered in 1970, 299 equity funds underperformed or did not beat the market, 47 broke even, and only 9 equity funds beat the market.

Similarly, TwinCities.com also reported that only 35 Mutual Funds out of the 1,446 Large Cap Blend Mutual Funds outperformed the S&P 500 Index (10 years ending October 2004).

The general consensus is most active managed funds can’t beat the market. If this is a problem, then investors won’t be able to meet their investment objectives, and can’t fulfill their retirement needs. What is the solution?

According to Providend’s Chief Executive Officer Mr Christopher Tan, “Investment gurus endorse the use of passive instruments like Index funds and ETFs. Unfortunately, in the Singapore Exchange, there are less than 20 ETFs listed. Most are narrowly focused on the emerging markets. But there are only 3 feeding into the Vanguard funds plus their fees are high.”

Due to the lack of accessibility for these instruments, most retail customers then buy mutual funds or structured funds from their retail bankers or insurance agents.

Mr Tan said, “At a meeting with the former Vanguard managing director Mr John Robinson, I asked him about bringing the Vanguard ETF to Singapore, but Mr Robinson replied that there were no distributors willing to help push the ETF products. They were not too excited in passive investment instruments because the commissions were low.”