DBS Triple Happiness Fund! Trouble again?

DBS ------------Me---------AIG Banque

What happened?
Yesterday night, I received a grey letter from DBS. The letter contained updated information on a fund called “DBS Triple Happiness Capital Guaranteed Fund” which my mum and I took out part of my inheritance and place $20,000 into that fund in early 2006, to reap better interest as compared to the miserable fixed deposit rate they were giving then. As I continued to read the letter, my heart sunk when they said this sentence on page 2 “In the event of a default by AIG Inc, it is possible that Banque AIG may not honour the Guarantee and agreements entered in the with the funds” .
What this sentence simply means is if AIG were to collapse, AIG Banque being a family member of AIG will also likewise or maybe collapse, therefore our fund in this Triple happiness will no longer be guaranteed thus exposing our funds to all the indexes that they (DBS asset management) invested in. In addition I did my research and found the effects of this notion:In the event that AIG Banque will not honour the funds, DBS asset management team will either
1) Choose another grantor, such as Aviva, Great Eastern in doing incur additional cost that will be taken from the fund. (Additional cost)
2) Terminate the fund at current market price. (10% loss as current market price is now 0.91 as of 27th September 2008)
3) Continue the fund in which the fund will no longer have the name “Guaranteed” , in other words, your fund will not be protected and will be diversified among all the indexes that they the DBS management team have invested in (Exposed to market risks)
This research made me sick to my stomach; didn’t I invest in a GRUANTEED FUND? How come can turn out like this?Is AIG really safe?I took a brief look at AIG’s accounts and this is what I found, in
June 2008
Total Assets: $1,049,876,000,000
Total Liabilities: $971,688,000,000
Net asset value: $78,188,000,000Woah! Safe what right? How come AIG still need to get extra capital from Federal government?
But think again! Under their assets, there are accounts such as fixed maturity securities, Equity securities, Mortgage and other loans receivable, Real estate and other fixed assets.
Some of these assets are subprime or subprime related, their securities are also mixed into subprime problems.Their account Fixed maturity securities worth $423,000,000,000, if I’m not wrong, are also mortgage related. Therefore I’m pretty sure that their net asset value is NOT $78Billion, its really net asset value will have to be calculated, once the FBI investigates properly into their accounts.

News
INSURER AIA yesterday continued to allay the concerns of edgy policyholders, reassuring them that its parent firm AIG will not reduce the capital of its subsidiaries or tap into Asian operations for cash.The statement from AIG comes on top of news yesterday that the American insurer has received a US$85 billion (S$122 billion) loan from the US Federal Reserve that will effectively enable it to stave off bankruptcy.Alpha Financial Advisers' chief executive Arthur Lim said that it brings some reprieve to a very bad situation and would buy the firm some time to get its house in order. And Mr Gary Harvey, chief executive officer of ipac Wealth Management Asia, urged customers who are thinking of surrendering their plans to ignore the noise in the marketplacehttp://www.asiaone.com/Business/News...918-88471.html




Furiously, I personally went down to one of the POSB branches the next day and enquired about this fund. As usual, the relationship manager assures me that my funds are safe for now, telling me not to worry for now, that AIG Banque is safe for now. The thing that bothers me the most is the two words “FOR NOW”, ok so what happens after, “For now”, in the event should AIG collapse what should policy holders such as myself do?

I wasn’t really happy with the replies that the relationship manager gave, as she kept beating around the bush when questions such as what will be the cost incurred to policies holders should DBS Asset.M team change to another Guarantor? What should we do to maximize our compensation from investing in this fund, if AIG were to really collapse? How will DBS deal with this situation in its best possible way , not to make policies holders panic if such an event were to happen? Fortunately I wasn’t the only there who was unhappy with DBS triple happiness, this elderly dressed in his weekend best, was arguing with another relationship manager right next to my counter, he scolded her loudly “Don’t lie to me OK!? I don’t care what AIG; what sub prime ****, all I DON’T CARE hor, all I know is DBS guaranteed this fund and I want my money BACK!”.

Apparently he didn’t realize that AIG Banque was the guarantor and was stated in the brochures/ prospectors of all triple happiness funds. Not that great after all.

In addition, the structure of the fund itself is not that great neither, no doubt giving us a 6.5% interest at the end of 6 months was decent, we as policy holders have to hold the policy for the long 5 years, which is 1.3% per year, this doesn’t even include the management fee of 3% and Singapore’s inflation of currently 5-6%. In other words, the actual calculation is 6.5%-3%-5%= -2.5%, our money are still affected by inflation at lesser rate of 2.5%. It can also be argued that this fund provides early termination if market is good. But from the looks of today’s market , it seems we definitely have to hold until maturity as we all know that market nowadays are very bad.
What can we do?

Then that bring me to my other point, what can we as policy holders do? We can either
1) Complain to DBS first and if all else fails complain to Financial Industry Disputes Resolution Centre for Misrepresentation. - Many people like myself who signed up for this fund were not aware that AIG Banque was the guarantor as there was little emphasis from the relationship manager on such risks at that point in time when I invested, I had the impression that it was DBS, as the relationship manger who introduced me to this fund, said that this fund was 100% safe, even safer then Government bonds, that is what induced me to go head investing in this fund.
Numbers to call: Tel: 18002211111 ask for the triple happiness fund manager or a representativeTel: (65) 63278878 Financial Industry Disputes Resolution

2) Suffer the additional cost of getting another guarantor-Finding another guarantor will not be easy, especially if the fund is trading at a loss. If Asian markets were to go down even further, the cost of obtain another guarantor will be higher? There might also be a probability that finding another guarantor becomes impossible, should the market value of this fund were to drop even further. Per unit price for triple happiness as of 27th of September 2008 is 0.91 any policy holder who were to terminate the fund now will suffer a loss of 10% of their initial capital, this doesn’t not include any additional cost as stated in the fund or inflation or erosion of time value of money.

3) Demand for some compensation from DBS asset management or the bank itself as a whole. Compensation for either the cost of obtaining a new guarantor or suffering from any paper loss. -You guys marketed this product so aggressively and passionately to me and now you tell me that the fund is not guaranteed anymore and as policy holder I’m to bear the additional cost of getting a new guarantor or suffer paper loss if the fund were to be terminated , isn’t that a bit too much.I believe the right thing to do is to compensate some or all the cost for me or for us, this is because not doing so, the Bank as a whole, might loss out on more of its retail customers having gone through the DBS high notes which wasn’t enough and now this Capital guaranteed suddenly turn out to be not guaranteed. Too much! Really too much! Don’t make us suffer more.
Come on, DBS, not only did you exclude me and other retail investors from your preference shares, your high notes are making me worried and now your guaranteed product also have problems. I also believe a lot of investors out there are unhappy, I plead to you guys is to please compensate us, is ever AIG were to collapse in the future which then result in paying extra costs for the GURANTEED fund , don’t make DBS triple happiness into DBS triple sadness.