Introducing Endowus Flagship Portfolios: a core strategy for your financial goals

As investors, we are spoiled for choices, and oftentimes, we may also find ourselves spooked by news headlines and noises, adding to the complexity of making investment decisions. 

Investing is now made easy with the launch of Endowus Flagship Portfolios on Endowus Hong Kong — the investment portfolio of choice by clients in Singapore, as the bedrock of your core investment allocation.

What are Endowus Flagship Portfolios?

Endowus Flagship Portfolios are designed to be a one-stop solution for clients seeking diversified optimised risk-adjusted returns for their long-term core wealth accumulation.

Whether you’re a moderately conservative investor looking for steady growth or an aggressive investor seeking higher returns, there is a portfolio out of six in the Flagship series designed to be a starting point. 

To further simplify your investment journey, the Endowus Flagship Portfolios are offered as a Discretionary Portfolio Management (DPM) service on the Endowus HK platform. 

What is Discretionary Portfolio Management? ‍

DPM is an investment management service on a framework guided by SFC regulations, where clients grant the DPM portfolio manager authority to make buy-and-sell decisions on their behalf. The DPM portfolio manager performs all the heavy lifting, from portfolio construction to executing transactions, also monitoring the portfolio stay aligned with clients’ agreed mandate/threshold freeing the client from the need to monitor the market constantly. 

Expert advice and portfolio management that is free of any potential conflict of interest 

The autonomy of a discretionary portfolio manager to make changes to an investment comes with heavy responsibility. 

At Endowus, this responsibility is taken very seriously. Our non-commission-based business model ensures all our investment management decisions are solely driven by merits of an underlying fund, rather than external influences, such as how much commissions we would receive. 

Behind the portfolios is an implementation of a strict, institutional-grade screening process by the Endowus Investment Office with a combined 100+ years of institutional investing experience. The team is led by our Chief Investment Officer Samuel Rhee, previously the CEO and CIO of Morgan Stanley Investment Management Asia, with over three decades of industry experience.

Designed as one-stop solution for your core investment allocation 

The Endowus Flagship Portfolios series offers six core portfolios, each carefully constructed with a different mix of equity and fixed income — designed to span the entire risk spectrum to cater to each investor’s unique risk tolerance and associated return expectations. 

Risk level of portfolios: The risk levels of the Flagship Portfolios range from 2 to 5 (risk scale is 1 to 6 where level 6 is the riskiest) 

If your investment objective is to achieve higher long-term expected returns by taking on more risk, we will tailor your portfolio can have a higher allocation in equities and vice versa. 

You should particularly pay attention to both the average, best and worst historical 12-month rolling returns of the portfolios and assess whether the potential loss profile is a magnitude you can tolerate.  

The thought process of choosing an appropriate risk tolerance will help you stay disciplined in holding your investments during market uncertainty. 

Asset allocation that matters

Endowus employs an evidence-based investment approach to portfolio construction. 

At the heart of our methodology is what we refer to as strategic passive asset allocation (SPAA):

• Strategic top-down: The allocations to different asset classes such as equities, fixed income, geography, style or factors, are set based on the goal of the portfolio.

• Passive in implementation: Endowus steers clear of adjusting the portfolio’s allocations based on short-term market trends or economic forecasts (ie. tactical allocation).
• Curation of underlying building blocks: Endowus selects Best-in-Class funds to best reflect your goal’s strategic asset allocation by accessing leading global fund managers with the expertise, scale and proven track records. We also ensure to look for the lowest possible cost options on your behalf. 

While short-term market movements remain unpredictable, we have confidence in the long-term resilience of our investment approach. 

Read more: Understanding the difference between strategic and tactical allocation

While some investors may want extra exposure to a specific market, theme, or sector. That is a tactical allocation outside of the Flagship allocation and can be expressed through a satellite portfolio.

Together, this is known as a core-satellite approach, but that should come after — not before — starting with a well-diversified core portfolio such as the Endowus Flagship Portfolio. 

Three investing styles combined 

In the Endowus Flagship Portfolios, we marry three different sets of investment approaches and investment philosophies.

• Index Investing tracks market results by replicating broad market exposure instead of trying to outguess the market. We have included low-cost, index funds by BlackRock and Amundi, which form part of the backbones of both the equity and fixed income components.
• Systematic investing focuses on following a set of quantitative rules to systematically capture well-defined factors or premiums. Its foundation lies in academic research developed by Nobel Laureates Eugene Fama and Kenneth French. We have incorporated funds managed by systematic investing powerhouse, Dimensional Fund Advisors.
• Active investing relies on bottom-up research, market analysis, to make informed decisions on security selection, duration, and timing with the aim of outperformance. PIMCO, one of the most successful active fixed income managers are key building blocks to the fixed income components.

The diverse investment approaches of the funds balance each other out, creating a portfolio that is not overly reliant on a single sector, geographical region, investment style, or factor, while still having the potential to outperform.

Why choose the Endowus Flagship Portfolios?

1. Diversification

Designed to be broad market investment portfolios, the Endowus Flagship series are designed to be well-balanced and diversified across sector allocation, geographies and market capitalisations (as illustrated in the 100% Equity portfolio composition below).

As Nobel Prize laureate Harry Markowitz famously said, “Diversification is the only free lunch” in investing. 

The Endowus Flagship Portfolios are composed of more than 10,000 underlying individual securities, mitigating the idiosyncratic risks associated with investing in individual stocks or bonds. As a result, you can lower overall portfolio risk and potentially achieve more consistent long-term returns.

2. Unique access to institutional-grade strategies from global leading fund managers

We have combined decades of investment wisdom by integrating Best-In-Class funds from world-renowned investment managers: 

1. Amundi is the largest asset manager in Europe with over EUR 2 trillion of assets under management and is also known for its commitment to sustainable investing. 
2. BlackRock is the world's largest asset manager. Its global reach and comprehensive product lineup allow for broad market exposure, including U.S. and international stocks and bonds, commodities, and real estate. 
3. Dimensional Fund Advisors specialises in implementing academic research into the practical world. A powerhouse with over US$700 billion in assets under management, DFA's approach is rooted in the belief in market efficiency, while recognising the potential for higher expected returns identified through financial science.
4. PIMCO is the world’s largest dedicated active fixed-income manager, renowned for its expertise in bonds and other debt securities. PIMCO's active management approach also provides tactical opportunities in the fixed-income markets for investors.

The DPM element of the portfolios also opens up access to products that were previously only available to institutional investors and high-net-worth individuals, such as the underlying equity strategies managed by Dimensional Fund Advisors. 

3. Low, fair cost and transparent fees

Total Expense Ratio as low as 0.21%: Endowus is committed to providing our clients with access to Best-In-Class funds at the lowest achievable cost. This includes access to institutional share class funds and offering an industry-first 100% cashback on trailer fees. 

The total expense ratios of the Endowus Flagship Portfolios stand at 0.21% to 0.35% p.a., which is significantly lower than the median fees of equity and fixed income funds in Hong Kong which stands at 1.85% and 1.35% respectively according to research by Morningstar. 

No dividend withholding taxes: Endowus has constructed our portfolios using UCITS funds, which are more tax efficient than US-listed ETFs, for which Hong Kong investors are subject to a 30% dividend withholding tax.

For example, Vanguard's US-listed emerging market index ETF VWO has an expense ratio of 0.08% (as of May 2024). However, VWO currently has a dividend yield of ~3.4%, a 30% withholding tax would add an additional cost of 1.02% (=3.4%*30%) for Hong Kong investors.

All-in transparent fees: Endowus does not charge any subscription fees, redemption fees, switching fees or trading fees. The only fee we charge for the Endowus Flagship Portfolios is an all-in, transparent Endowus fee, which ranges from 0.25% to 0.60% based on assets you hold with Endowus. 

4. Backtested portfolio performance

The Endowus Flagship Portfolios have displayed consistent and robust historical performance over the short-term and longer-term periods. The performance figures in the tables below are as of 31 May 2024. These were calculated using the oldest share classes available for the funds and are in USD.

Representative Performance of the Endowus Flagship Portfolios

Representative Volatility of the Enowus Flagship Portfolios

We expect the portfolios to continue to deliver similar risk-adjusted returns, relying on security selection to outperform with contributions from asset allocation via the underlying funds.

Steps to invest in the Endowus Flagship Portfolios on Endowus Hong Kong

Here are a few simple steps to create a Flagship portfolio for your goals. We will use the Balanced portfolio as an example. 

Step 1: Log in to your Endowus account. Click on “Explore” on the navigation and select Flagship

Select Endowus Flagship Portfolios and opt-in for the discretionary portfolio management service. 

Don’t have an account with Endowus Hong Kong? Get started here.

Step 2: Select a portfolio you are interested in 

Select your investment objective, investment horizon and amount of risk you are willing to take in order to view the corresponding portfolio. Based on your investment objective and risk profile, we would recommend if the portfolio is suitable for you.

Step 3: Review the details of the portfolio and click on “Continue” if you wish to proceed.

Here, you will be able to see details of the portfolio such as portfolio description, asset allocation, underlying funds, historical performance and fees.

Step 4: Set up your investment plan by entering the amount you would like to invest. You can choose to invest a one-time and/or recurring amount. 

Based on your investment amount, you will be able to see the projected outcomes in 30 years. You can click on “Continue to review” to review and confirm your investment, or you can choose to “Save goal and invest later”.  The minimum investment amount of Endowus Flagship Portfolios starts at HK$10,000.

Remember that return is proportionate to risk. You should consider your risk tolerance — for example, how much money can you tolerate losing in a certain time period, in a worst-case scenario? The portfolio should then suit your risk appetite, as well as your investment timeline and financial goals.

Step 5: Review and confirm your investment. 

Review the portfolio you have selected and your investment plan. You can choose to rename your goal here as well.

At Endowus, wealth management made simple, for everyone

Investing should be made simple, for everyone. Endowus has helped to level the playing field for individual investors, to gain access to institutional-grade investment solutions and advice at low, fair cost. 

Endowus Flagship Portfolios are where you can begin to build your investing journey from just HK$10,000 and allow your returns to compound over time. 

Click here to get started with Endowus HK today.

If you have any questions, feel free to connect with our SFC-licensed client advisors and schedule a free 1-on-1 consultation here.

For an overview of all the funds available through Endowus, refer to our investment funds list or learn more about our other model portfolios in this article.

Read more:

• Introducing the Endowus HK team
• Why invest through Endowus
• What is Fund Smart?
• An overview of the Endowus model portfolios

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Risk Warnings

Investment involves risk. Past performance is not an indicator nor a guarantee of future performance or returns. Projected performance or returns is not guaranteed to materialise. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down. Individual stock performance does not represent the return of a fund. 

Risk related to discretionary management . As Flagship Portfolios are provided under discretionary services, Endowus will manage the assets under the portfolio subject to compliance with the terms and conditions of the DPM Services Agreement and on a fully discretionary basis; you will not have any role or right to make investment decisions, except for making contributions or withdrawals from the portfolio; it would not be mandatory for Endowus to provide the underlying fund prospectuses or other fund information to you for each and every investment decision made on behalf of you.  You should exercise caution before investing in discretionary managed portfolios. 

Flagship Portfolio may contain professional-investors only fund(s) and/or “Complex Product”.  In general, Professional-investors only funds are funds that have not been authorised, nor have the offering documents been reviewed by the SFC.  “Complex Products” (as defined by the Securities and Futures Commission, the “SFC”) refer to investment products (e.g. funds) whose terms, features and risks are not reasonably likely to be understood by retail investors because of their complex structures.  Professional-investor only funds and Complex Product in general may have higher risk than other retail and non-complex products.  Past performance is not indicative of future performance. All investments involve risks (including the possibility of loss of the capital invested) and the price of fund units may go up as well as down. This fund may invest in financial derivatives which may involve additional risks (e.g. market, counterparty, liquidity, leverage and volatility risks) and lead to higher volatility. In adverse situations, the fund may suffer significant losses. This fund is not principal protected. In the worst-case scenario, you may lose the entire invested amount. Do not invest in a complex product unless you understand and are willing to assume the risks associated with it, including (in some cases) the risk that you may lose more than the invested amount. Please refer to the “Important Information About Funds” for details of the risks involved.  If you are in any doubt, you should clarify with us or seek independent professional advice.

General risk warnings relating to collective investment schemes 

Before making an investment decision, you are reminded to refer to the relevant prospectus/ offering document for specific risk considerations and related fees and charges. Funds are not a bank deposit and not capital guaranteed, and is subject to investment risks, including the possible loss of the principal amount invested. Some of the funds also involve derivatives. Do not invest in them unless you fully understand and are willing to assume the risks associated with them.

Opinions

Whilst Endowus HK Limited (“Endowus”) has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies or typographical errors.  Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this material are subject to market influences and contingent upon matters outside the control of Endowus HK Limited (“Endowus”) and therefore may not be realised in the future. Further, any opinion or estimate is made on a general basis and subject to change without notice. In presenting the information above, none of Endowus HK Limited, its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You may also wish to seek financial advice through a financial advisor or the Endowus platform and independent legal, accounting, regulatory or tax advice, as appropriate.

No invitation or solicitation

Nothing contained in this article should be construed as a solicitation, an offer to buy or sale, or recommendation, to acquire or dispose of any security, commodity, investment or to engage in any other transaction in any jurisdiction in which such solicitation, offer to buy or sale would be unlawful under the securities laws in such jurisdiction. No information included in this article is to be construed as investment advice or as a recommendation or a representation about the suitability or appropriateness of any advisory product or service; or an offer to buy or sell, or the solicitation of an offer to buy or sell, any security, financial product, or instrument; or to participate in any particular trading strategy. Investors should seek independent financial and tax advice before making any investment decision.

Product Risk Rating: Please note that any product risk rating (the “PRR”) provided by us is an internal rating assigned based on our product risk assessment model, and is for your reference only. The PRR is subject to change from time to time. The PRR does not take into account your individual circumstances, objectives or needs and should not be regarded as advice or recommendation to purchase, hold or sell any fund or make any other investment decisions. Accordingly, you should not solely rely on the PRR in making your investment decision in the relevant Fund.

This article  has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.