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A $10 million goodwill gesture by UOB?
05:55 AM Oct 21, 2009
by Conrad Raj
SINGAPORE - As a gesture of goodwill to more than 4,000 customers, United Overseas Bank (UOB) has made a one-time offer to redeem the units of two funds it sold in 2005 - PruYield 15 and PruYield 20 - owned and managed by Prudential Asset Management (Singapore). The offer guarantees that customers, who had invested about $150 million in the two funds, get back their initial offer price less the annual payouts received to date.
The bank has written to customers, who bought the funds, offering 88 cents per unit for the PruYield 15 fund and US$0.82 per unit for the PruYield 20 Fund. If, however, the prevailing net asset value of the funds is higher on the applicable dealing day, the customer will get the higher price.
Explaining the move, UOB's executive vice president & head of personal financial services, Mr Eddie Khoo, said: "The performance of the funds has been impacted by the global financial crisis and some of our customers have expressed concerns about the impact of market volatility and economic uncertainty on their investments. Whilst we cannot do anything about market volatility and economic uncertainty, we can help to allay our customers' concerns by going the extra mile and giving them an element of certainty."
It is understood that UOB will not hold on to the funds, but sell them immediately, so it will not make any money on this exercise. In fact, UOB could be out of pocket by as much as $10 million based on prevailing net asset values and the number of customers likely to take up the offer.
The offer, which ends on November 6, is open to those who bought either fund directly from UOB and was holding on to the funds as at Oct 16.
As at Oct 16, the price of PruYield 15, comprising more than 95 per cent of the two funds sold, was 81.5 cents while PruYield 20 was US$0.842. With the interest paid so far, most investors would be able to recoup their original investment from the UOB offer. However, if PruYield 15 customers hold on to their funds till maturity in June next year, they could recoup their original $1 per unit plus 15 cents in total payouts.
Others who sold these two funds include HSBC, Maybank, Hong Leong Finance and Prudential itself. Most have yet to say if they would follow suit,
Said Maybank: "The investment has a current market value at the moment and the investment is due to mature in about eight months time. Customers may wish to decide to hold till maturity or redeem at any point in time. We will leave the options open for our customers."
A spokesman of HSBC, one of the biggest sellers of the PruYield funds, said, "We have been monitoring the situation very closely and keeping customers informed with regular updates on the funds' performance in particular the NAV which have been steadily improving. We will continue to do so including consideration of the appropriateness of a redemption offer which we will advise to customers in due course."
URL http://www.todayonline.com/Business/EDC091021-0000075/A-$10-million-goodwill-gesture-by-UOB
Copyright 2009 MediaCorp Pte Ltd | All Rights Reserved
I would like to know, why are these 2 funds chosen? From the article, I quote UOB's executive vice president & head of personal financial services, Mr Eddie Khoo,05:55 AM Oct 21, 2009
by Conrad Raj
SINGAPORE - As a gesture of goodwill to more than 4,000 customers, United Overseas Bank (UOB) has made a one-time offer to redeem the units of two funds it sold in 2005 - PruYield 15 and PruYield 20 - owned and managed by Prudential Asset Management (Singapore). The offer guarantees that customers, who had invested about $150 million in the two funds, get back their initial offer price less the annual payouts received to date.
The bank has written to customers, who bought the funds, offering 88 cents per unit for the PruYield 15 fund and US$0.82 per unit for the PruYield 20 Fund. If, however, the prevailing net asset value of the funds is higher on the applicable dealing day, the customer will get the higher price.
Explaining the move, UOB's executive vice president & head of personal financial services, Mr Eddie Khoo, said: "The performance of the funds has been impacted by the global financial crisis and some of our customers have expressed concerns about the impact of market volatility and economic uncertainty on their investments. Whilst we cannot do anything about market volatility and economic uncertainty, we can help to allay our customers' concerns by going the extra mile and giving them an element of certainty."
It is understood that UOB will not hold on to the funds, but sell them immediately, so it will not make any money on this exercise. In fact, UOB could be out of pocket by as much as $10 million based on prevailing net asset values and the number of customers likely to take up the offer.
The offer, which ends on November 6, is open to those who bought either fund directly from UOB and was holding on to the funds as at Oct 16.
As at Oct 16, the price of PruYield 15, comprising more than 95 per cent of the two funds sold, was 81.5 cents while PruYield 20 was US$0.842. With the interest paid so far, most investors would be able to recoup their original investment from the UOB offer. However, if PruYield 15 customers hold on to their funds till maturity in June next year, they could recoup their original $1 per unit plus 15 cents in total payouts.
Others who sold these two funds include HSBC, Maybank, Hong Leong Finance and Prudential itself. Most have yet to say if they would follow suit,
Said Maybank: "The investment has a current market value at the moment and the investment is due to mature in about eight months time. Customers may wish to decide to hold till maturity or redeem at any point in time. We will leave the options open for our customers."
A spokesman of HSBC, one of the biggest sellers of the PruYield funds, said, "We have been monitoring the situation very closely and keeping customers informed with regular updates on the funds' performance in particular the NAV which have been steadily improving. We will continue to do so including consideration of the appropriateness of a redemption offer which we will advise to customers in due course."
URL http://www.todayonline.com/Business/EDC091021-0000075/A-$10-million-goodwill-gesture-by-UOB
Copyright 2009 MediaCorp Pte Ltd | All Rights Reserved
"The performance of the funds has been impacted by the global financial crisis and some of our customers have expressed concerns about the impact of market volatility and economic uncertainty on their investments. Whilst we cannot do anything about market volatility and economic uncertainty, we can help to allay our customers' concerns by going the extra mile and giving them an element of certainty."Sounds nice and all, but it still doesn't explain why these 2 funds are chosen.
Is Prudential in any financial trouble, in risk of foreclosure? I doubt so.
Are the funds performing any worse than the other funds under UOB asset management? I don't think so.
Are the funds exposing the customers to excessive risks? Not at all.
I can easily pick many others whereby customer's are making a bigger loss than these two funds, many which may be unsuitably recommended for a certain customer's risk profile. (China/India, BRIC, Resources fund just to name a few)
The 2 funds chosen are both capital protected funds, with PruYield15 maturing NEXT YEAR with a protected price of $1 whereby UOB is only offering $0.88 (which btw is only $0.07 more than the offer price as at 16 Oct). Honestly, unless I'm in urgent need of money right now, why do I not want to hold on my money for another 8 months and get another 12% more return ($1 in Jun2010 vs - $0.88 from UOB = $0.12 = 12%)? Where else can I park my money if I redeem the fund which can offer me a guranteed 12% return??
For the PruYield20 Fund, price as of 16 Oct is US$0.842, yet UOB is offering US$0.82 and thats suppose to attract me why? If I sell the fund off in the open market, I can potentially still make a profit!
I'm not sure how I can put this across in a nice way, but I think this is bullshit. UOB is not showing sincerity that they are really offering any goodwill at all. Though they might have set aside $10 milion to provide for this provision, I would be interested to know what proportion of this money will be spent at all at the end of the offer, given that any rational investors would probably think like I do and not take up this ridiculous offer.
Is this a cheap publicity stunt by UOB now that they have become the smallest local bank and trying to retain/buy customer's confidence?
I'm not convinced, not by a long shot.
I agree. It's fishy how they decided to redeem the offer only now instead of back when the prices were dirt low.
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