November 2024 Portfolio Performance Review

Endowus Core-Flagship Cash/SRS Portfolio

The 100% Equity Portfolio performed in line with the broad equity market in November 

• The Flagship Cash 100% Equity Portfolio returned 5% after fees, versus the global equity market’s 5.1% returns in November.
• Small caps outperformed their large-cap holdings in the US. The Equity Portfolio’s tilt towards smaller cap companies via a Dimensional fund provided a tailwind for relative performance against the benchmark. This positive impact was negated by the Portfolio’s slight underweight to the US as US equities rallied on the back of Donald Trump set to be the next President and the expectations that his policy programme will lift growth, lower taxes and deregulate the financial sector.
• The Portfolio’s structural overweight in emerging markets dragged performance. Emerging markets underperformed developed markets by over 9% as the election results were met with some caution amid concerns over potential tariffs from the US.
• The best performing funds in the equity sleeve were the Amundi USA Prime Fund and the iShares US Index Fund. The Amundi Index MSCI Emerging Markets Fund was one of the main detractors.

The 100% Fixed Income Portfolio posted positive returns in November and outperformed the broad fixed income market by about 0.2%

• The global fixed income markets — as represented by the Bloomberg Global Aggregate Index — and the 100% Fixed Income Portfolio posted positive returns for the month. 
• Most of the fixed income funds outperformed the benchmark for the month 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 Global Bond Fund.

Endowus Core-Flagship CPF Portfolio

‍Note: The Flagship CPF Portfolio allocations were updated in July with three new funds from Dimensional Fund Advisors. 

The 100% Equity Portfolio performed in line with the broad equity markets in November

• Similar to the Flagship Cash Portfolios, both the CPF 100% Equity Portfolio and the global equity market had strong positive returns.
• The Portfolio has similar characteristics as the Flagship Portfolio and the tilt towards smaller cap holdings through the Dimensional Global Equity Fund provided a tailwind for relative performance against the benchmark.
• Similar to the Flagship Portfolio, the Portfolio’s structural overweight in emerging markets dragged performance.
• The best performing fund in the equity sleeve was the Amundi USA Prime Fund while the Schroder Global Emerging Markets Opportunities Fund was one of the main detractors.

The 100% Fixed Income Portfolio rose 0.7% in November and slightly underperformed the global fixed income markets

• The global fixed income markets — as represented by the Bloomberg Global Aggregate Index — rose across the board. The 100% Fixed Income Portfolio rose as well but to a lesser extent.
• The biggest contributor to relative underperformance was the United SGD Fund with its shorter duration position. Funds that had shorter duration rose less in November as they are less sensitive to interest rate changes. 
• The best performing fund in the fixed income sleeve was the Franklin Templeton Western Assets Global Bond Fund

Endowus Income Portfolios

The Stable Income Portfolio gained in November, despite lagging the broader credit market

• The Portfolio’s overall shorter duration stance contributed to the negative relative performance, as yield went down in November (bond price and yield are negatively correlated).
• The best-performing underlying fund in November was the PIMCO GIS Income Fund (+1.4%) while allocation to Asian bond funds detracted the most from relative performance. 

‍The Higher Income Portfolio delivered positive return in November while lagging the 20-80 benchmark

• Both fixed income and equity components detracted from their respective markets. 
• Its fixed income component underperformed the broader credit market due to its shorter duration and its allocation to Asian bonds and high yield bonds as both segments underperformed relatively in November. 
• Its equity component’s performance lagged due to negative security selection in its global equity allocation. Additionally, its allocation to emerging markets and Asian markets detracted from relative performance as both markets underperformed the US equities market in November.

The Future Income Portfolio was positive in November while lagging the 40-60 benchmark 

• Both fixed income and equity components detracted from their respective markets. 
• Its fixed income component underperformed for reasons similar to that of the Stable Income.
• Its equity component’s performance was driven by its overweight allocation to European and Asian equities as both markets underperformed the US equities market in November. 

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 November 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 0.3% gain in November 2024. 
• 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; each contributing 0.3%. 
• 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. 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 November.
• This performance was supported by steady returns from the underlying funds, although it was somewhat muted due to lower duration and non-risk assets lagging during the month following the US election results and monetary easing across developed markets.

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

• Cash Smart Ultra achieved a return of 0.3% in November.
• The largest contribution came from the PIMCO Low Duration Income Fund, which benefited from its exposure to securitized assets generating higher yields in the current market. The other underlying funds also contributed positively, performing largely in line with their respective duration exposures.

As the rate environment normalises, we observe that the returns of the three Cash Smart Portfolios are aligning with their respective risk profiles. Since the beginning of the year, Cash Smart Secure generated the lowest returns, followed by Enhanced and Ultra.

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