Endowus January 2025 Performance Review

Endowus Core-Flagship Cash/SRS Portfolio

The 100% Equity Portfolio delivered strong positive returns in January, rising 2.2% even while modestly trailing the broad equity market.

• The Flagship Cash 100% Equity Portfolio delivered a solid performance in January, generating a 2.2% return after fees, slightly trailing the global equity market’s 2.6% gain (before fees).
• A key driver of the portfolio’s performance was its tilt towards value stocks, which outpaced growth stocks during the month. This positioning, implemented through the Dimensional Global Core Equity Fund, proved beneficial and emerged as the top-performing fund within the equity sleeve.
• The Portfolio faced headwinds from its structural overweight in emerging markets and Pacific regions. Emerging markets underperformed developed markets by nearly 2% in January, primarily due to the drag from India equities. This underperformance is consistent with the trend observed in 2024, where emerging market equities, despite posting gains, lagged behind developed markets.

The 100% Fixed Income Portfolio posted positive returns in January, outperforming the broad fixed income market by about 0.3%

• The global fixed income market, as measured by the Bloomberg Global Aggregate Index, demonstrated resilience in January, posting positive returns despite significant market volatility.
• All the underlying fixed income funds outperformed the benchmark in January with the exception of the iShares Global Aggregate 1- 5 Year Bond Index Fund, as its shorter duration detracted from performance.
• The best-performing fund in the fixed income sleeve was the PIMCO GIS EM Market Bond Fund.

Endowus Core-Flagship CPF Portfolio

The 100% Equity Portfolio delivered a solid 2.4% gain in January, although it modestly trailed the performance of the broader equity markets.

• The CPF 100% Equity Portfolio mirrored the robust performance of the global equity market in January 2025, delivering strong positive returns.
• A key driver of the portfolio’s success was its strategic tilt towards value companies, implemented through the Dimensional Global Core Equity Fund. This positioning proved particularly advantageous, providing a significant tailwind for relative performance against the benchmark.
• However, similar to the Flagship Portfolio, the CPF 100% Equity Portfolio faced headwinds due to its structural overweight in emerging markets as emerging market equities underperformed developed market equities. 
• Within the equity sleeve, the Dimensional Global Core Equity Fund was the best performer, while the Dimensional Emerging Markets Large Cap Core Fund was one of the main detractors.

The 100% Fixed Income Portfolio increased by 0.2% in January and slightly underperformed the global fixed income markets

• The global fixed income markets, as represented by the Bloomberg Global Aggregate Index, demonstrated positive performance across the board in January 2025. 
• The 100% Fixed Income Portfolio also experienced growth, albeit to a lesser extent than the broader market. This relative underperformance can be attributed to the portfolio's shorter duration positioning, which made it less sensitive to interest rate fluctuations.
• The best-performing fund in the fixed income sleeve was the Dimensional Global Core Fixed Income III Fund while the worst-performing fund was the Eastspring Singapore Select Bond Fund. 

Endowus Income Portfolios

The Stable Income Portfolio gained in January and outperformed the broader credit market

• The Portfolio’s exposure to credit spread risk via flexible income bond funds added to relative performance as the credit spread tightened in the month of January. On the other hand, its allocation to Asian bond funds slightly lagged the global credit market. 
• The best-performing underlying fund in January was the PIMCO GIS Income Fund (+1.0%)

The Higher Income Portfolio delivered positive returns in January and outpaced the 20-80 benchmark

• Its fixed income component outperformed the broader credit market due to its exposure to credit spread risk via the flexible income bond funds and global high-yield bond fund. 
• Its equity component’s performance lagged the global equity market slightly due to its overweight exposure to emerging markets equities and Asian equities, both of which lagged the global equity market in January. However, the relative weakness was partially offset by the Portfolio’s overweight exposure to value and small-cap stocks, which saw strong performance against growth and large-cap stocks in January. 

The Future Income Portfolio delivered a strong performance in January 

• Its fixed income component outperformed for reasons similar to that of the Stable Income.
• Its equity component’s performance was only slightly behind the global equity market due to its slightly overweight exposure to Asian equities. 

All three Income Portfolios are achieving their payout targets 

• Actual payouts have remained stable despite the fluctuation of prices across the three Portfolios. Volatility in price returns will result in mark-to-market changes (decrease or increase) in the Portfolio value, but will not impact the actual coupon payments or dividend payouts from the underlying funds. 
• Yields in the fixed income market have risen meaningfully following the increase in global interest rates, creating a higher yield environment for income-seeking investors. 
• The changing interest rate environment has resulted in a divergence between the respective payout yields of Stable Income and Higher Income. This divergence is a reflection of the enhanced ability of investment grade flexible income funds to generate income in the current environment of elevated interest rates, compared to high yield and equity funds. 
• These dynamics were pivotal in the Recommended Portfolio Change in Nov 2023, where we improved the credit quality of all three Portfolios while maintaining the target payout levels. As we continue to monitor these evolving market conditions, it's crucial to remember that the Higher Income Portfolio is strategically crafted to yield a higher total return than the Stable Income Portfolio over the long term

Endowus Cash Smart Portfolios

Cash Smart Secure continued to generate stable and positive returns

• The Secure Portfolio maintained its stable return profile, posting a 0.2% gain in January 2025. 
• This performance could be attributed to the continued positive returns from both the underlying funds, the Fullerton SGD Cash Fund and the LionGlobal SGD Enhanced Liquidity Fund, which contributed 0.3% and 0.2%, respectively. 
• It is worth noting that the total returns of the underlying funds are showing signs of reduction as market yields decline with expectations around Fed rate cuts and a more dovish MAS policy stance. Investors seeking higher yields may consider increasing their duration exposure through Cash Smart Enhanced or Ultra.

Cash Smart Enhanced provided stable returns

• Cash Smart Enhanced generated a return of 0.2% in January.
• This performance was supported by steady returns from the underlying funds, although it was somewhat muted by a slight dip in the UOBAM United SGD Fund at the beginning of January as investors considered the inflationary impact of Trump policies. Regardless, the fund’s short duration provided a cushion, allowing it to recover quickly and ultimately outperform the broader fixed income markets in January, finishing in positive territory.

Cash Smart Ultra benefitted from allocation into longer duration and credit components

• Cash Smart Ultra achieved a return of 0.3% in January.
• The largest contribution came from the PIMCO Low Duration Income Fund, which provided 0.8% in returns after a robust recovery from the initial market volatility. Other underlying funds, such as Fullerton Short Term Interest Rate Fund also delivered positive returns, supported by their shorter duration strategies.

As the rate environment normalises, although with continued volatilities along the way, we observe that the returns of the three Cash Smart Portfolios align with their respective risk profiles.

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