SGX Grants Multiple Waivers to LionGlobal Short Duration Bond Fund: What Investors Need to Know

Lion Global Investors Limited, the manager of the LionGlobal Short Duration Bond Fund (the “Fund”), has announced that the Singapore Exchange Securities Trading Limited (SGX-ST) has granted several significant waivers from the SGX-ST Listing Manual rules for the Fund’s listed class, the Active ETF SGD Class (Dist). These regulatory waivers could impact market dynamics, fund operation, and investor value, making this a headline development for current and prospective investors.

Key Points from the Announcement

• SGX-ST Grants Six Major Waivers: The Fund will not need to comply with key listing rules relating to minimum asset size, investment restrictions, reporting timelines, the announcement of weekly net tangible assets, and shareholder approval for a change in investment manager.
• Waivers Are Conditional: Each waiver comes with specific conditions, notably compliance with the Code on Collective Investment Schemes (the “Code”) and enhanced disclosures via the Manager’s website and SGXNET.
• Potential Impact on Liquidity and Transparency: The waivers are designed to balance regulatory flexibility with investor protections, but they also introduce unique operational practices for the Fund that investors must understand.

Detailed Breakdown of Waivers and Implications

1. Minimum Asset Size Requirement (Rule 404(1)(a))

The Fund is exempted from the requirement to have a minimum asset size of S\$20 million at listing. This could mean the Fund may launch and trade with less capital than typically expected, which may affect early liquidity and price stability. The waiver is contingent on appointing a designated market maker to ensure a ready market for trading units. Investors should monitor trading volumes and spreads closely in the initial phase.

2. Investment Restrictions on Related Party Holdings (Rule 404(3)(a))

The Fund is not bound by the SGX-ST’s limit of 10% for investments in companies related to substantial unitholders, but must instead comply with the Code, which has its own restrictions. This could affect portfolio composition and risk profile, especially if substantial unitholders have significant related company interests. Transparency and monitoring will be crucial for investors.

3. Unlisted Securities Investment Cap (Rule 404(3)(c))

The Fund can invest more than 30% of its assets in unlisted securities, particularly high-quality, liquid fixed income instruments like Singapore Government Securities. This may enhance yield and flexibility but could also introduce valuation and liquidity risks for investors. The Fund must still comply with the Code’s requirements.

4. Financial Reporting Timelines (Rules 705(1), 705(3)(b), 705(4))

Instead of the SGX-ST’s stricter reporting deadlines (45 or 60 days), the Fund will publish audited annual accounts within three months of financial year-end and semi-annual accounts within two months of the half-year. All reports will be available electronically on the Manager’s website, and results will be announced via SGXNET. Investors benefit from timely access, but should be aware of the longer reporting window, which may delay market reactions to financial developments.

5. Weekly Net Tangible Assets Announcement (Rule 748(1))

The Fund is not required to announce net tangible assets, given it holds no tangible assets. Instead, the net asset value (NAV) per unit, sale price, and redemption price will be published daily on the Manager’s website and announced on SGXNET weekly. Investors should use these NAV disclosures to track fund performance and value.

6. Shareholder Approval for Change of Manager (Rule 748(4))

The Fund’s trust deed offers robust mechanisms for removing or replacing the Manager without shareholder approval in certain circumstances (e.g., liquidation, regulatory action, trustee determination). The Manager must notify unitholders and the Authority in advance if a change occurs without shareholder approval, and must seek approval for appointment of a new manager where required. This flexibility could allow swift action in crisis situations, but investors should be vigilant about management changes and their rationale.

Price-Sensitive and Potentially Market-Moving Information

• Launch Flexibility: The Fund may list with less than S\$20 million in assets, potentially affecting early liquidity and pricing.
• Portfolio Composition: Higher exposure to unlisted fixed income securities and related-party investments could alter risk/return characteristics.
• Transparency and Reporting: Shift to website-based disclosures and longer reporting windows may affect how quickly investors react to developments.
• Managerial Changes: Streamlined process for manager replacement could impact Fund performance and investor confidence, especially if triggered by adverse events.

Additional Investor Information

• The Manager will publish portfolio holdings monthly (with a one month lag), NAV per unit daily, and all key announcements on its website and SGXNET.
• Unitholders can access full audited accounts and reports electronically, ensuring transparency despite the waivers.
• Market makers are in place to support liquidity in the listed class units.

Conclusion

These regulatory waivers signal SGX-ST’s willingness to accommodate innovative fund structures while maintaining investor protections via the Code and enhanced disclosures. Investors should carefully monitor Fund launches, portfolio changes, reporting timeliness, and management stability, as these factors could materially affect unit prices and fund performance.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult professional advisers before making investment decisions related to LionGlobal Short Duration Bond Fund or any other securities mentioned herein.

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