Financial Planning Central » Investment

Landbanking firm Raided by CAD

Tiang Chuan — Thu, 26 Aug 2010 06:13:53 +0000

A prominent landbanking firm with the well-known tagline of ‘Buy UK Land!’ was raided by CAD last week, according to a report in the 26th August 2010 issue of The Business Times. The story was reported in the Today paper on 20th August.

According to The Business Times report, documents were carted away and the directors were brought in for questioning.

12 unhappy investors also showed up at the company’s office on 24th May. There was shouting and shoving and the police were called in. More than 40 investors showed up at Speakers Corner on 12th June to protest against the company. There was also a report of an investor suing the company after she failed to get back her investment of US22,500.

The managing director of the company was quoted as say that the complaints and CAD probe are a result of “people (being) frightened of what they don’t understand“. The company also claimed that they never lost any money for their clients. The operations director mentioned that the bulk of their customers “keep coming back – 70 to 75% of their business is repeat business.

From the forums and media reports, it does seem that many investors have problem getting their money back. A personal friend had to resort to making repeated phone calls to the management and threatening with complaints to the media that he finally managed to get his money back.

When CAD first investigated Sunshine Empire, the company was also full of confidence and claimed that they welcomed the CAD probe.

It remains to be seen how this probe will turn out.

Looking For Dividend Yield? Try Asset Allocation Instead

Tiang Chuan — Mon, 16 Aug 2010 10:48:23 +0000

Asset allocation can offer investors cash flows similar to dividends stocks with lower risk. Read the article – Looking for Dividend Yield? Try Asset Allocation Instead to find out more.

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Sunshine Empire’s James Phang gets 9 year jail sentence

Tiang Chuan — Sat, 31 Jul 2010 07:06:04 +0000

The law has caught up with Sunshine Empire’s mastermind James Phang. Phang who was sentenced to 9 years’ jail term and $60,000 fine. Phang’s wife, Neo Kuon Huay was fined $60,000. Former director Jackie Hoo Choon Cheat was sentenced to 7 years’ jail. The trio will be appealing against their convictions. These were reported in the 31th July 2010 edition of The Straits Times.

The Sunshine Empire collected $180m from selling 26,000 packages. James Phang collected more than $7m in “consultancy fees’ while Jackie Hoo got about $950,000. James Phang’s wife was paid $950,000. However, there is bad news for the thousands of investors – they are likely to get little nothing back and only $21m have been recovered.

In a Straits Times report on 24th October 2007, James Phang was quoted as saying “I’m a legend – better than Warren Buffett“. In another report on 15th Nov 2007, Sunshine Empire’s spokesman Mr Kegan Lee said that “company executives would be most happy to meet CAD officers to explain its business activities” after CAD started investigations.

Sunshine Empire will certainty not be the last of the scams to go bust. It is just one out of the many scams out there. Some of them are mocking the legal system here saying that there are operating a legal business since the authorities in Singapore, a country with strict laws, are allowing them to operate here. The CAD certainty have its work cut out if there are serious in stamping out such fraudulent schemes in Singapore.

Landbanking Firm’s High Return?

Tiang Chuan — Sun, 25 Jul 2010 14:56:19 +0000

A landbanking firm placed a half page advertisement on the 25th July 2010 edition of The Sunday Times. In the advert, a 28.24% average rate of return was reported. The figure was even reported to be audited by a large audit firm.

Average rate of return is not the standard way investment return is reported. Normally, investment return is reported using Compounded Annual Return (Compounded Annual Growth Rate, CAGR) or a.k.a Geometrical Return. The average rate of return is the Simple Average of the returns.

I check out the report on their website and the Compounded Annual Return is 14.82%, only half of the reported 28.24% average rate of return.

A Geometrical Return will never be higher than the Simple Average. A simple example - An investment gave a 100% return in year 1 and drop 50% in year 2. What is the Simple Average Return and Geometrical Return? Ans:

Simple Average Return – 25% p.a.

Geometrical Return – 0% p.a.

I find it misleading to report the Simple Average return while the Geometrical Return is available. Even the report state that the “compound rate of return is more commonly used in Canada“. But hey, landbanking is not regulated anyway. So we should not be surprised at the non-standard way of reporting investment return.

Sunshine Empire Trio Convicted

Tiang Chuan — Sat, 17 Jul 2010 15:46:19 +0000

The Straits Times reported that the founder of Sunshine Empire was “found guilty by a district court for running a fraudulent scheme and for faking account“. James Pang Wah, Jackie Hoo Choon Cheat and Neo Kuon Huay will be sentenced on July 30. Those who have invested with Sunshine may want to check out the CAD website to get more information about possible refunds. According to the CAD new release, “Persons who have placed money with Sunshine Empire Pte Ltd are advised to wait for further updates by the CAD on the case.“

As the court proceeding for this Ponzi scheme reaches a conclusion, there are many others out there that should also be apprehended. The most notorious scam now revolves around gold. The investor is promised a high return for buying gold bars, which is sold at 20% higher premium than the market rate (sometimes also known as listed price). The return can start around 2% for a month to higher amounts for longer tenure. The company also promises to buy back the gold bar at the original purchased price (listed price). Different variations of the scam exists. A friend asked for my opinion on such a scheme about a month ago. He told me that many people in his company have invested. I can only hope that they can get back their money.

There have been more developments across the causeway where firms have been raid by their authorities. Here are the links

Bank Negara also maintains a site listing the ongoing probes. Some are familiar names in Singapore as well.

Do people ever learn?

Dual Currency Deposits – Do You Know You Have Become The Insurer?

Tiang Chuan — Wed, 16 Jun 2010 04:00:29 +0000

Avoided like the plague during the financial crisis, structured products are reviving like green shoots after a long awaited rain. Dual Currency Deposits in particular, have been really popular. Depositors may not have understood the risks involved. Read the article – Dual Currency Deposits – Do You Know You Have Become The Insurer? to know more.

Horror Story – Bank tries to sell 10 year structured deposit to a 90 year old

Tiang Chuan — Wed, 09 Jun 2010 02:51:25 +0000

A 90 year old went to the bank to renew her fixed deposit. Upon seeing her savings, the bank tries to sell her a 10 year structured deposit.

The lady did not take up the offer and went home to consult her family.

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Horror Story – How A Bank Milked $700K In Commission From $1.8M Investment

Tiang Chuan — Tue, 01 Jun 2010 12:17:16 +0000

Simon (not his real name), wanted to invest USD2 million. Seeing that the market is volatile, Keith (not his real name), Simon’s private banker from bank B, suggested a Regular Savings Plan (RSP) to ride out the volatility. The RSP time frame is 3 years. So USD1.8m went into a USD50,000 per month RSP plan for a total of USD1.8m over 3 years. The remaining USD200,000 went into a Dual Currency Deposit (DCD).

3 years have passed, Simon wanted to liquidate the portfolio. He got back USD500,000 from his RSP. What happened?

Keith had placed Simon into a USD50,000 per month 25 years regular premium Investment-Linked-Plan (ILP). As this was a 25 year ILP, there was a hefty early termination penalty of 50% of the market value. The market value was also negatively impacted by the equity market.

How was the bank and Keith affected?

The bank earned a commission of USD700,000 from the ILP, of which USD210,000 went to Keith. By now, Keith have left bank B and joined bank H.

From USD1.8m, Simon is left with USD500,000.

What Your Money Manager Don’t Want You To Know

Tiang Chuan — Tue, 20 Apr 2010 12:05:19 +0000

Money managers have to cope with numerous limitations and constraints. Investors should be wary and consider these restrictions when deciding who would be the better choice in managing their wealth. Read the article What You Money Manager Don’t Want You To Know to find out more.

A Super Return Fund?

Tiang Chuan — Thu, 15 Apr 2010 11:23:54 +0000

There was a report on Wednesday’s (13th April) edition of The Straits Times about the staggering returns that a novice fund produced in 2009 (Novice investment fund outperforms big guns). I decided to check out that fund’s website.

According to the article, the fund was named by Thomson Reuters as the “best performing Singapore-registered fund”. The fund returned 155% in 2009 vs the 30% produced by the MSCI Asia index. The article also mentioned about the good individual returns produced by the fund managers from “over the six years to September 2007″. There was no mention of the 2008 returns. The following are the returns listed on the website.

In 2008, the fund was down 62% whereas the ‘benchmark’ was down 42%. Suddenly, the fund does not seem to be that super.

And that MSCI Asia Index. I cannot remember an MSCI index called ‘MSCI Asia’. A fast check on the MSCI website seem to indicate that the MSCI AC Asia index is used. Is is a correct index to be benchmarked against? I do not think so. There was no fund factsheet or prospectus on the website and thus there was no fund mandate to be found. Maybe the fund has a ‘free’ mandate and hence, there is no suitable benchmark. However, from the information found, this fund seem to have a Singapore small to mid cap bias. Thus, I would feel that the FSTE ST Mid-Cap Index would be a better benchmark. This index was down 57.9% in 2008 and up 95.6% in 2009.

Overall, the Straits Times report seem to have reported only the good but not the bad. Do take media reports with a pinch of salt.