Endowus Q4 2024 Performance Review

Endowus Flagship Portfolios — Cash/SRS

Key performance highlights: The Flagship Cash/SRS Equity Portfolio continued to deliver positive returns in the quarter posting a return of 4.6% while keeping pace with the broad global equity markets. The Flagship Cash/SRS Fixed Income Portfolio also generated negative returns but outperformed the broad fixed income markets by about 0.7%.

For the one-year period, the 100% Equity Portfolio underperformed by about 0.5% while the Fixed Income Portfolio outperformed its benchmark by 1.6%.

‍The 100% Equity Portfolio, again, faced headwinds from its structural biases — being value focused, and with a slight overweight to emerging markets and small caps in general - and lagged its benchmark as a result. 

The Amundi Prime USA Fund and the iShares US Index Fund were the best performers in the equity sleeve, as they closely tracked the US indices. The Dimensional Funds, on the other hand, were hampered by their exposure to the size and value factors.

The worst performing fund for the quarter was the Dimensional Pacific Basin Small Companies Fund as exposure to small caps in 5 developed countries in the Pacific region detracted from relative performance. 

Similar detractors were in play in the one-year period as well.

The 100% Fixed Income Portfolio outperformed the global fixed income market in the fourth quarter, helped primarily by allocation to shorter duration bonds relative to the index. 

The iShares Global Aggregate 1-5 Year Bond Fund was the best performing fund for the quarter as its shorter duration contributed to the portfolio’s fourth quarter’s relative performance. Short duration bonds outperformed longer duration bonds on the back of considerable volatility in the fixed income markets in the last quarter of 2024. The 10-year Treasury yield experienced a notable rise, finishing the year at 4.57% as there was market uncertainty regarding the Fed's future actions amidst rising expectations for inflation and if President-elect Trump were to implement all his economic policies. On a credit front, high yield bonds, which the Portfolio had exposure to, outperformed their investment-grade counterparts driven by expectations of pro-business policies under the Trump administration. 

The worst performing fund for the quarter was the PIMCO GIS Emerging Market Bond Fund followed by the Dimensional Global Core Fixed Income Fund. 

For the one-year period, the best performing fund in the fixed income sleeve was the PIMCO GIS Emerging Market Bond Fund followed by the PIMCO GIS Income Fund while the worst performing fund was the Dimensional Global Core Fixed Income Fund.

‍Endowus Flagship Portfolios — CPF 

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

‍Key performance highlights: The Flagship CPF 100% Equity Portfolio posted positive returns in the last quarter of 2024 and outperformed the broad global equity markets by 0.3%. The 100% Fixed Income Portfolio generated negative return but kept pace with the broad fixed income markets.

In the one-year period, the Equity Portfolio returned 21.7% and outperformed the global equity benchmark by 1.4% while the Fixed Income Portfolio returned 1.5% and performed in line with the broader fixed income benchmark. 

The Amundi Prime USA Fund was the best performing fund for the quarter and the year as the US outperformed most of the other major markets. The largest detractor from relative performance was overweight to emerging markets through the Dimensional Emerging Markets Large Cap Core Equity III Fund and the Schroder Global Emerging Market Opportunities Fund as emerging markets underperformed developed markets. Similar detractors were in play in the one-year period as well.

The 100% Fixed Income Portfolio performed almost in line with the broader fixed income market in the last quarter of 2024. The quarter’s strongest performing fund in the fixed income portfolio was the United SGD Fund which benefited from its short duration positioning. The worst performing fund was the Dimensional Global Core Fixed Income III Fund which conversely suffered from its longer duration. This was also consistent across a one-year period. 

Endowus ESG Portfolios 

‍Key performance highlights:  Although the portfolio achieved a positive performance of 2.1%, it fell short of meeting the benchmark. The underperformance was due in part to two factors: the portfolio's longer duration profile and its lower allocation to mega cap tech stocks. While these factors impacted mostly the active allocations within the portfolio, the more passive funds were the main contributors to the overall portfolio's performance.

One specific fund that contributed to the underperformance was the KBI Global Sustainable Infrastructure Fund. Defensive in nature, the fund was negatively impacted by rising interest rates and a shift in investor preferences away from assets like utilities and infrastructure towards higher-growth sectors. Additionally, emerging markets performed worse than developed markets during the quarter, as Donald Trump's election was seen as a potential challenge for the region.

The Fixed Income Portfolio underperformed the benchmark in the fourth quarter by 0.3%. The Portfolio’s overweight allocation to investment grade credit was a detractor. On the other hand, its allocation to the Asian bond market via Eastspring Asia ESG bond helped to cushion the downside. Despite the challenging fourth quarter, the portfolio ended the year outperforming the benchmark by 0.4%.

The Endowus ESG Portfolios not only focus on financial returns but also on promoting positive societal and environmental impact. We are committed to being responsible stewards of capital, as demonstrated by our active review of ESG data to inform our investment decisions.

For instance, the ESG 100% Equity Portfolio aligns better with the United Nations Sustainable Development Goals, showcasing lower greenhouse gas emissions and enhanced board gender diversity compared to the global equities.

Our ESG 100% Fixed Income Portfolio also emphasises investments that contribute to environmental sustainability and social well-being. 

The PIMCO GIS Climate Bond Fund allocates over 75% to green bonds. The PIMCO GIS ESG Income Fund tilts towards companies or issuers with positive ESG characteristics, seeks a lower carbon footprint and actively engages issuers. The Allspring Climate Transition Global Investment Grade Credit Fund targets to decarbonise the Fund by 2050 and excludes securities exposed to ESG risks. 

Endowus Factor by Dimensional Portfolios

‍Key performance highlights: The Factor 100% Equity Portfolio underperformed its benchmark over the quarter while the Factor 100% Fixed Income outperformed the global fixed income markets.

The Global Core Equity Fund contributed most to the Portfolio's performance over the quarter, the Dimensional Emerging Markets Sustainability Core Equities Fund and Dimensional Pacific Basin Small Companies Fund had lower returns and ended the quarter with negative performance. This aligns with the overall performance of the Portfolio in 2024.

The Fixed Income Portfolio outperformed the Bloomberg Global Aggregate Index. While the Global Core Fixed Income Fund slightly underperformed the index, the shorter-duration funds played a key role in generating positive returns and stabilising the overall performance of the portfolio. This trend was consistent across 2024.

Factor premia are long-term in nature and investors that maintain exposure to them over a longer-term horizon are generally rewarded. However, this means potential short-term underperformance from time to time.

Endowus Satellite Portfolios

Launched in November 2021, the Endowus Satellite Portfolios are designed to supplement the core portfolios and offer clients specific exposure to opportunities in selected regions, themes, asset classes, and trends. 

In taking a core-satellite approach, most investors should allocate the bulk of their asset allocation to the core portfolios. 

China Equity Portfolio

Key performance highlights: The Endowus China Equity Portfolio registered negative returns in the fourth quarter of 2024. Despite the promising stimulus measures announced by the central bank in September, the market optimism eventually fizzled out over the quarter. A consequence of the lack of forceful fiscal policies at the National People’s Congress, as well as geopolitical woes following Trump’s presidency. Allocations to funds with exposure to Greater China markets such as Taiwan, as well as value tilted strategies which were more defensively positioned, aided in cushioning overall performance as the market declined. 

In the last quarter, we have conducted a Recommended Portfolio Change (“RPC”) to the China Equity Portfolio, aiming to optimise via increasing its diversification across sectors, styles, and market capitalisations, supporting a smoother investment journey in China’s volatile markets.

Learn more: Latest enhancements to Endowus Satellite Portfolio - China Equities‍

Megatrends Portfolio 

‍Key performance highlights: The last quarter of 2024 was an eventful one, with several key events in the US having a large impact on equity returns. Donald Trump’s triumph in the US presidential election contributed to the positive return in November, as investors looked forward to lower taxes and a more business-friendly environment. However, the Fed’s hawkish stance in December shocked markets, resulting in 2024 ending on a sour note. Volatility was also seen in the USD-SGD currency pair, with the USD appreciating by 6% over the quarter.   

The Megatrends Portfolio underperformed the benchmark over the quarter, with several themes struggling and impacting the Portfolio’s performance. Climate investing remained challenging, as sentiment continued to shift away from renewables with base interest rates staying elevated. Trump’s election victory further dampened the mood, due to his stated support for traditional energy sources. As such, climate-focused companies in the portfolio performed poorly, with the GMO Climate Change Investment Fund (minus 16%) being the main detractor due to its core focus on climate investing.

The healthcare and biotech sectors were some of the hardest-hit sectors by the Fed’s hawkish announcement, due to the sectors’ higher sensitivity to interest rates. Further adding to the uncertainty was Trump’s naming of Robert F. Kennedy, Jr., a perceived critic of traditional healthcare services, as the head of the Department of Health and Human Services. Consequently, the Janus Henderson Horizon Biotechnology Fund declined by about 6% over the quarter.

On a brighter note, the Thematics AI and Robotics Fund bucked the trend with a 7% return over the quarter. While the Fund benefited from the overall risk-on sentiment in November, stock selection was also a key driver of outperformance. In particular, Snowflake had a very strong month in November, on the back of robust quarterly results and an optimistic outlook from company management.

Technology Portfolio 

‍Key performance highlights: The Tech Portfolio delivered a 1.1% gain in December 2024, bringing the Q4 return to 8.2% and closing the year up 23.3%.

During the quarter, the portfolio delivered attractive returns despite market challenges. In October, portfolio return was in line with the broader tech sector, with the communications sector showing particular resilience amidst uncertainties surrounding the US election and moderating global growth. November was a strong month, as US tech companies and smaller non-US firms benefited from pro-growth sentiment following Trump's election and the easing of monetary policies. December also saw resilient returns, with larger and more established tech players generating positive performance despite a Fed-induced sell-off and volatility from Trump-driven tariffs.

Additionally, clients who opted in for the Recommended Portfolio Change (RPC) in November 2024 will be pleased to see that the new version of the portfolio outperformed the older version in Q4 and through 2024. This outperformance was largely due to the new portfolio's increased exposure to larger-cap tech leaders, which provided stronger returns compared to smaller-cap, non-US tech stocks amidst continued market volatility. Clients who have not yet opted in may do so at any time via the Endowus app.

Learn more: Latest enhancements to Endowus Satellite Portfolio - Technology

Global Real Asset Portfolio

‍Key performance highlights: The Real Assets portfolio faced considerable headwinds in Q4 of 2024 and detracted 8.2% from performance for the quarter. Most of the negative performance came in December on the back of a reduction in the number of expected rate cuts in 2025 coupled with a selloff in climate transition equities. 

Rate-sensitive sectors such as real estate, utilities and communications came under pressure as the yield on the 10-year treasury was up 0.39% in December and nearly 1% since the middle of September. This resulted in both the Real Estate and the infrastructure components of the portfolio having lacklustre returns for the quarter as they fell 8% and 10% respectively. 

In addition, the portfolio’s exposure to climate transition equities mainly through the KBI Sustainable Infrastructure Fund faced a massive selloff after Trump's election due to fears over widespread overhauls of clean power and decarbonisation policies. 

The best performing fund over the quarter was the PIMCO GIS Commodity Real Return Fund followed by the Janus Henderson Horizon Global Property Equity Fund. Meanwhile, the worst performing fund for the quarter was the Ninety One Global Natural Resources Fund as equities in the energy and materials sectors underperformed the rest of the market with lower inflation expectations hampering the top-line revenue growth of these companies. 

In the last quarter, we have conducted a Recommended Portfolio Change (RPC) to the Global Real Asset Portfolio, previously known as the Global Real Estate Portfolio. Through this RPC, the Portfolio was repositioned to seek exposure to real assets.

Learn more: Introducing Endowus Real Assets Portfolio

Endowus Income Portfolios 

‍Key performance highlights: The Stable Income Portfolio declined by 1.3% in the fourth quarter, outperforming the broader credit market. The Portfolio’s shorter duration relative to the benchmark contributed to its better performance. Neuberger Berman Short Duration Emerging Markets Bond Fund was the only fund that had positive performance (0.2%) in a generally unfavourable environment in the fourth quarter. JP Morgan Income Fund delivered the second most resilient performance (minus 0.5%) as a result of its defensive duration positioning. 

The Higher Income Portfolio declined by 1.3%, underperforming the 20-80 benchmark. The fixed income component of the portfolio was more resilient than the broader credit market, thanks to its shorter duration and allocation to the high yield market. However, the equity component of the portfolio faced a few headwinds. It lagged the broader equities market due to its overweight exposure to listed real estate and Asian equities, as well as its underweight exposure to large-cap growth stocks such as the Magnificent Seven.  In addition, as most of the underlying equities funds are currency-hedged, the 6% appreciation in USD against SGD proved to be a headwind. 

The Future Income Portfolio delivered a positive 0.2% return, underperforming the 40-60 benchmark in the fourth quarter. The fixed income component mirrors the Stable Income Portfolio and was more resilient than the credit market. Its equity component, on the other hand, underperformed the broader equities market. Similar to the Higher Income Portfolio, currency hedging of some of the underlying equity funds as well as its underweight position to large-cap growth stocks detracted from relative performance. However, positive fund selection in European and Asian equities helped to offset some of the underperformance. For the full year of 2024, the Future Income Portfolio performed in line with the 40-60 benchmark while meeting the 3.5-4.5% payout target. 

• 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 acknowledge 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

‍Key performance highlights: The Cash Smart portfolios delivered positive and attractive returns in Q4 2024, each finishing the year strongly and in line with their respective objectives.

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

Cash Smart Secure closed the year up 3.6%. This was supported by consistent monthly returns of approximately 0.3% throughout 2024. The two underlying funds, Fullerton SGD Cash Fund and LionGlobal SGD Enhanced Liquidity Fund, proved to be resilient liquidity management options during the volatile fourth quarter. As these two funds are showing signs of yield decline in line with broader market trends, it might be a good idea to consider moving your cash to longer duration portfolios, such as Enhanced or Ultra, to generate extra returns, provided it aligns with your investment situation and objectives.

Cash Smart Enhanced reported a return of 0.2% in the fourth quarter, finishing 2024 with a 3.9% return. All underlying funds contributed positively in Q4, although returns from United SGD were slightly dampened due to volatility in the broader fixed income market, influenced by geopolitical tensions, central bank policies, and unexpected inflation data. Overall, the portfolio generated a "middle ground" return within the Cash Smart suite, aligning with its design to offer greater return potential than Secure with slightly added risk.

Cash Smart Ultra generated a return of 0.2% in Q4 2024, with slight dampening due to market volatility, particularly in the last month of the year. Overall, the Ultra portfolio finished 2024 with the strongest return among the Cash Smart range, achieving 4.1%. This performance underscores its suitability for investors willing to take on added risk in exchange for higher return potential to manage short-term cash.

Cash Smart Portfolios, primarily exposed to USD and SGD market rates, are seeing declining projected yields as markets enter a rate-cut cycle. Given the varying levels of duration and credit risk across the portfolios, investors are encouraged to review their investment goals and assess whether their current Cash Smart Portfolio remains aligned with their needs.

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For more on the market outlook, click here. Watch our webinar on Q4 2024 performance and market insights for the new year at this link.

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