.jpg)
- We are excited to share the launch of the Endowus IncomeUp Portfolios, designed to provide investors with access to passive income streams while keeping in mind their longer-term capital preservation or growth needs.
- We provide our clients with three model portfolios of choice, IncomeUp Steady, IncomeUp Plus and IncomeUp Growth, designed to cater for investors at different life stages with different income needs and preferences.
- Depending on one’s goals and risk appetite, each of the ready-made, pre-populated templates can be used as is, or changes could be made to suit one’s preferences and needs.
- The higher rate environment allows us to choose less risky investment to maintain at the same level of payout as previously.
- Depending on your life stage, the three portfolios are designed with capital preservation (Steady and Plus) or potential growth (Growth) in mind.
- To get started with Endowus HK, click here. For an overview of all the funds available on the Endowus Fund Smart platform, refer to our investment funds list.
What are the Endowus IncomeUp Portfolios?
We are excited to share that Endowus Hong Kong is launching Endowus IncomeUp Portfolios, a set of three investment portfolios — IncomeUp Steady, IncomeUp Plus and IncomeUp Growth.
Curated by the Endowus Investment Office, they are specifically designed to meet the different income and capital preservation or growth needs of investors at different life stages.
The portfolios were constructed with the expertise and experience of the Endowus Investment Office, using Best-In-Class funds from leading global asset managers such as AllianceBernstein, Barings, Capital Group, Fidelity, Invesco, JP Morgan, Neuberger Berman, PIMCO, Pinebridge, and Schroders.
In a single investment portfolio, investors can get exposure to diversified sources of income, with no lock-up periods, subscription or withdrawal fees, while enjoying competitive payout targets of up to 7.5% p.a*.
Investors can use these pre-populated portfolios as a starting point. Alternatively, suiting to personalised preferences or needs, investors can also make changes to the portfolios to better reflect their investment goals.
Why invest in the IncomeUp Portfolios?
1. IncomeUp Portfolios are designed to meet income and growth needs at different life stages
The Endowus IncomeUp Portfolios are crafted to cater to investors' long-term income and growth objectives.
With thoughtful and deliberate asset allocation and portfolio construction, these portfolios enable investors to navigate through market noise and distractions, allowing them to prioritise what truly matters, including their individual circumstances and life stages.
Prioritising capital preservation with stable payouts: The IncomeUp Steady Portfolio prioritises capital preservation and stable payouts, making it suitable for individuals nearing or in retirement, as well as those seeking a consistent passive income from their savings. This portfolio invests 100% in fixed income assets, primarily focusing on higher quality and diversified fixed income products. Its objective is to prevent distribution payouts from long-term savings while maintaining a stable payout target of 5.0% to 6.0%* per annum, with limited or no capital appreciation.
Generating a sustainable, higher cash inflow: The IncomeUpPlus Portfolio caters to working adults, including those in the "sandwich generation," typically facing higher monthly spending requirements. With a slightly higher risk threshold, it is a 100% fixed income portfolio with a bias towards higher risk and higher yielding fixed income products, aiming to achieve a current payout target of 6.5% to 7.5%* per annum, with limited or no capital appreciation.
Laying a foundation for the future: The IncomeUp Growth Portfolio is designed for young working adults in their late 20s and 30s, who seek regular income contributing to their monthly expenses. With the advantage of time, they can continue their savings to potentially increase future payout amounts. This portfolio allocates 60% to high quality and diversified fixed income funds, 20% to dividend-paying, globally diversified equities, and 20% to accumulating, globally diversified equities, aiming for a current payout target of 4.0% to 5.0%* while seeking long-term capital growth. Its design enables the potential for higher future payouts.
What makes up the Endowus IncomeUp Portfolios
2. Lock in higher yield to match your longer-term needs facing looming rate cuts
While the aggressive rate hike cycle since early 2022 has weighed on markets. On the flipside, an elevated level of interest rates improves the forward-looking income and the total return prospect for fixed income, making the asset class more attractive.
The chart below illustrates the current yield-to-worst of different fixed income sectors in comparison to their historical 10-year range. Currently, the yields across these sectors are positioned towards the upper end of the 10-year range and significantly above the 10-year median.
As of January 2024, investment grade bonds are currently giving out yields of over 5%, a level that was considered "unthinkable" merely three years ago. Additionally, high-yield bonds offer an attractive yield of approximately 8%, making them appealing to investors with a higher risk tolerance.
Source: JP Morgan, Guide to the Markets, as of January 31, 2024.
With cash rates reaching higher levels, and money-market funds yielding 4-5%, many investors are questioning the need to assume additional credit risk.
Reinvestment risk is often overlooked in this context. Cash rates fluctuate quickly, closely tied to the current interest rate environment. As we approach the end of the rate-hiking cycle, with potential rate cuts on the horizon, investors must consider the potential consequences of declining cash rates. Conversely, longer duration fixed income assets enable investors to secure higher yields for longer periods, better aligning with medium- to long-term goals.
One-time ticket Vs. Season pass
Opting for cash instead of fixed income is akin to purchasing a daily bus ticket - it offers flexibility but leaves you vulnerable to potential fare hikes. On the other hand, fixed income, held to maturity is comparable to buying a season pass–your expenses are fixed, and you can ride without concerns about price fluctuations throughout the pass’s validity.
Key features in the IncomeUp Portfolios
1. Strategic de-risking of the portfolios
In previous rate-hiking cycles, investors had to take on additional risks in their portfolios to attain higher yields. Now, the interest rate environment offers a higher risk-free rate, even less risky assets may be able to offer the payout that previously only offered by riskier assets.
When designing the portfolios, our Investment Office has ensured the portfolios are diversified across regional exposures and various sub-classes of fixed income, to ensure they are not over-exposed to regional concentration risks or high yield credit risk.
2. Manager diversification
The IncomeUp Portfolios are custom-built with thoughtfully chosen funds from a range of global fund managers. Endowus remains unbiased towards or against any single fund manager and instead, we always search for the best product offerings in each asset class. We would introduce new funds and managers if they are considered to be value-adding to the portfolio.
The portfolios were constructed with the expertise and experience of the Endowus Investment Office, using Best-In-Class funds from leading global asset managers such as AllianceBernstein, Barings, Capital Group, Fidelity, Invesco, JP Morgan, Neuberger Berman, PIMCO, Pinebridge, and Schroders.
Underlying funds of the Endowus IncomeUp Portfolios
3. Lowest possible fund investment fees
By offering unique access to institutional share class funds and 100% Cashback on all trailer commissions, the fees of the underlying funds included in the Endowus IncomeUp Portfolios are reduced by as much as 60%. Reduced costs directly contribute to improved investment returns for investors.
4. Competitive payout targets
With all the above in mind, the payout targets for each IncomeUp Portfolio are competitive — 5.0%-6.0% for IncomeUp Steady, 6.5%-7.5% for IncomeUp Plus, and 4.0%-5.0% for IncomeUp Growth*.
At Endowus Investment Office, one of our mandates is to regularly review, and endeavour to maintain consistent payout targets for as long as possible. We believe this offers investors a higher predictability of future cash flow. However, investors should note that payouts are not fixed or guaranteed. Evolving market conditions may lead to changes in payout levels that each portfolio can achieve.
Differentiated from other passive income options
The Endowus IncomeUp Portfolios fulfil the unmet demand in the market by offering a sophisticated and unique institutional-quality investment solution. These portfolios bridge the gap, catering to the diverse needs of investors.
Distribution out of capital is a common concern among investors as it can lead to an immediate reduction in the value of units. This means that investors end up with a smaller amount of capital (measured by NAV) after the distribution, rather than earning more from the income.
Our IncomeUp series is not intended to be decumulating. While the underlying funds may at times utilise capital to alleviate distribution shortfall or smooth out payout stability during times of volatility, all three portfolios are designed with capital preservation (Steady and Plus) or potential growth (Growth) in mind, though they are not principal-protected.
Besides, other passive income solutions in the market, like annuity products, endowment plans, and insurance-linked products have disappointed investors due to high hidden costs, transaction charges, or poor underlying asset choices. These products have thus shown inconsistent performance and well-below-market returns.
The performance of the IncomeUp Portfolios
Endowus IncomeUp Portfolios have demonstrated superior risk-adjusted performance relative to the reference benchmarks through cycles.
The Endowus IncomeUp Portfolios are not bound by specific benchmarks. While the Bloomberg Global Aggregate Credit Index and MSCI ACWI Index provide a reference for assessing the performance of the broader credit and equities markets, they are not closely tracked or replicated by the portfolios. Instead, the portfolios are designed to prioritize their unique income objectives.
How we built the IncomeUp Portfolios
The Endowus Investment Office is a team of investment experts with experience across public and private market investing, family offices, and wealth management. The team screens the universe of unit trusts, also known as mutual funds, and curates a final list by implementing a strict, institutional-grade screening process that is rigorous, thorough, and continuous.
The process, known as SMART+, vets funds across categories to bring you only those that are Best-in-Class, and the team monitors the funds regularly in terms of performance.
The Endowus Investment Office focuses on meeting our clients’ income investing goals by seeking to provide consistent target income distribution and attractive potential returns:
- Achievable target distribution: Balancing between higher-yielding and higher-quality assets, which perform differently in varying growth environments.
- Designed with resiliency: Working with the world’s leading fund managers to manage market volatility and changing macro environments to achieve the client’s desired level of payout target.
- All-weather approach: A globally diversified, multi-asset, multi-manager, and flexible strategy to income investing helps investors coast through evolving market and interest rate environments.
- Efficient asset allocation: Between fixed income and equities; income and growth, and capital preservation and appreciation, to balance between the primary objectives of each portfolio
The Endowus IncomeUp Portfolios are distinctive because it is independently constructed by Endowus, with the Investment Office employing a robust and holistic investment process.
For holders of other income portfolios – a guide to implementing the portfolio update
To subscribe to IncomeUp Portfolios, you can create a new goal of the IncomeUp Portfolios via Endowus Fund Smart.
For existing holders of any of the three current portfolios, transitioning to the upgraded version is seamless. By logging into your Endowus account and following a few simple steps, you can easily initiate the switch.
At Endowus, wealth management for everyone
The Endowus IncomeUp Portfolios offer investors a convenient and effective way to build a diversified portfolio that can meet their differing income and growth needs.
With Endowus, the digital wealth platform, investing is now made low-cost and accessible for every season in life, investing goal, and risk appetite. Make time your biggest asset and begin your investing journey with Endowus today. Start investing towards your goals from just HK$10,000.
At a low, fair, and transparent fee, both retail and professional investors can access Best-in-Class Funds and stand on the shoulders of financial giants. And with our industry-first 100% Cashback on trailer fees, save up to 50% or more on your investment fees.
Get more details about the IncomeUp Portfolios here. Read about the other Endowus model portfolios in this article.
For an overview of all the funds available on the Endowus Fund Smart platform, refer to our investment funds list. Follow this link to get started with Endowus HK.
Read more:
- Introducing the Endowus HK team
- Why invest through Endowus
- What is Fund Smart?
- An overview of the Endowus model portfolios
<divider><divider>
*This is an investment product. Projected yields are calculated based on the latest available weighted average net yields of underlying funds (also called yield-to-maturity) as disclosed by each fund manager, either in the latest monthly fund factsheets or website (as of 31 Jan 2024). Figures are net of fund-level fees after Cashback and Endowus fees. Potential yield is not equal to actual return. Yields are not guaranteed and past performance is not indicative of future performance.
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.
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.
Complex Products
Some of the funds contained in this article are complex products and investors should exercise caution when investing in these products. Though these products have been authorised by the SFC, authorization does not imply official recommendation. SFC authorization is not a recommendation or endorsement of a product nor does it guarantee the commercial merits of a product or its performance.
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.
.png)
