A peak at a Reuters headline out of the Far East ("Singapore mutual funds must cap expenses -experts") suggests that fund firms face pressure from the Singaporean government. However, a quick read of the article shows that is not the case. Instead, readers learn that a Vanguard Singapore managing director is calling for smaller funds and those with higher expenses to be closed. Coming from the giant fund specialist in low cost funds his comments are not much of a surprise (or even news) one would think.

The Reuters article [Link] is based comments made at a Reuters fund round table held in Singapore. Among the topics covered was the recent decision by Allianz Dresdner Asset Management to close six funds and AIG Global Investment Group to close 12 of its 16 funds.

Jon Robinson, managing director of U.S. mutual fund giant Vanguard Investments Singapore Pte Ltd., used his spot on the roundtable to argue that funds firms should cut their expense ratios to 200 basis points within three years of launch and to 15o bps. within seven to 10 years.

"As best practice, funds should either meet those targets or merge or close down. That way, we are keeping assets in the industry, and we are also protecting the industry and the customers in the long term," Reuters quotes Robinson as saying.

Robinson also lamented the distribution choke hold of three Singapore banks -- DBS Group Holdings Ltd., United Overseas Bank Ltd. and OCBC Bank Ltd.

"Too much of the control of the markets in this part of the world, in Singapore in particular, lies with the distributors, rather than the fund managers. And that will be in the long term to the detriment of the whole industry, if that continues," Robinson said.

The report did not point out that Vanguard itself would be one of the biggest beneficiaries of a market limited to lower fee and larger funds. Vanguard is one of the five largest fund managers in the world and is a specialist in low cost funds. The article also failed to mention that Vanguard prefers to sell its funds directly to investors, bypassing distributors altogether. 

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