Introducing Cash Management model portfolios: earn more on your cash with no lockups

Endowus has recently upgraded our cash management model portfolios to Endowus CashUp portfolios. Learn more here.

What are the Cash Management model portfolios on Endowus?

Selecting the right investment products to build a diversified portfolio can be time-consuming. That’s why we are excited to introduce the Cash Management model portfolios, to enable you to grow your wealth and reach your goals effortlessly with Best-In-Class strategies at low and fair fees.

We have built two Cash Management model portfolios to meet the different cash management needs of investors: Cash Management - Simple, and Cash Management - Plus. The key factor in choosing one of the two would be your risk appetite — whether you would like to take very minimal risk in return for small gains, or whether you are willing to take slightly higher risk for better returns.

That said, ultimately both model portfolios are designed for short-term cash management and are built using high-quality money market funds or ultra-short duration fixed income funds. The risks associated with the model portfolios are at the lowest possible level for investing your money, and losses tend to happen very rarely and in small amounts that recover within days.

Key characteristics: Cash Management - Simple and Cash Management - Plus

The Cash Management model portfolios are made up of multiple unit trusts, also known as mutual funds, that are curated by the Endowus Investment Office. Funds were chosen based on their historical track record in managing cash safely, and their superior yield-generation capabilities. They are also managed by top managers in the industry, including abrdn, Amundi, and Ping An, with decades of experience in money market and short-duration fixed income investing. 

Underlying funds of the Endowus Cash Management model portfolios

We have also worked with the managers to obtain the cheapest available share classes, such as in the form of institutional or clean share classes that offer the lowest possible fees. In cases where institutional or clean share classes are not available, we rebate 100% of the Cashback that Endowus receives, so that you can save on fees wherever possible. 

This is especially important for products such as cash management, where returns generated are relatively lower than other riskier investment products, and a few basis points of fees can dramatically change your returns.

Why invest in the Cash Management model portfolios

The Cash Management model portfolios can be an attractive investment option as they are:

• Designed for low-risk cash management
• Suitable to put your idle money to work for favourable returns
• A low-cost option built and operated by experienced money managers

1. Low-risk cash management option

The funds that constitute the Cash Management model portfolios (Aberdeen Standard Liquidity USD and Ping An USD Money Market Funds) are classified as money market funds by the Securities and Futures Commission, or are deemed suitable to be used for the purposes of short-term cash management (Amundi Cash USD Fund). 

They are governed by strict regulations in Hong Kong and Europe in terms of what they can and cannot invest in, in order to limit the exposure to risky securities for investors looking for a relatively safe option to manage their cash.

Some examples of restrictions include:

• Weighted average maturity: Regulators in Europe and Hong Kong mandate all the Cash Management model portfolio’s funds to keep their portfolio average duration lower than 60 days. In reality, the funds tend to keep the durations far lower than 60 days, which lowers the risk of volatility during rate hike cycles. ‍
• Liquidity: Similarly, the funds are required to maintain an ample level of liquidity in order to meet client redemption requests. This means that investors like yourselves are very likely to be able to withdraw your funds at any time, without any constraints. For Aberdeen Standard Liquidity USD and Ping An USD Money Market Funds, at least 10% of their assets need to be kept liquid daily, and for Amundi Cash USD, this is 7.5%. Again, in reality, the funds tend to keep an even higher level of liquidity than required.

Given the strict regulations, the funds tend to invest in relatively safe, high-quality money market securities that are highly likely to be stable – meaning that they are unlikely to produce negative returns, and even if there are losses, they tend to be small and recover within days. The resulting portfolio also tends to have a low duration, so that they are less affected by rate risks.

The relative safety of the Cash Management model portfolios are well-demonstrated by their past track record, which will be shown in the section below. In general:

• Cash Management - Simple has delivered relatively stable and safer returns.
• Cash Management - Plus has delivered higher total returns than Simple, although it does come with higher volatility. Nevertheless, losses have been small and have recovered quickly.

2. Put your money to work for yield

Imagine that you are lending $50 to your friend, who promises to pay you back next week. The friend also promises you to pay you $10 extra, as a token of gratitude. In this case, you will earn $10 next week — a yield of 20% upon the “maturity” of your friend’s loan.

Put simply, as long as your friend doesn't lose everything he has, you will earn 20% next week.

A similar concept applies to fixed income investing, including investing in money market funds. When you invest your money in the Cash Management model portfolios, the underlying fund managers will lend your money to various borrowers, be it in the form of bank deposits, commercial papers, and short-duration fixed income securities. 

Each of these securities will have different levels of yield and maturity, and as long as the borrowers (also known as issuers) do not go bankrupt, you will gain the full yield at the end of the maturity.

Of course, this is a simplified version of what the fund managers do, and there are other ways to generate additional returns on the money you invest. Regardless, in summary, yield-to-maturity is a good representation of the return you will receive as long as the issuers don’t default — which is why we can use it to reasonably project the level of returns you will get within the portfolio’s average maturity.

The underlying funds of the Endowus Cash Management model portfolios have historically demonstrated a good level of yield, even during periods of extremely low-rate or zero-rate environments like in 2021. In other words, the Cash Management model portfolios are a good way to put your idle money to work to gain some additional yield across all environments – but of course, remember that this is an investment after all, and is not capital guaranteed like putting your money in bank deposits.

3. Low-cost option built with experienced money managers

Finally, the Endowus Cash Management model portfolios offer investors the convenience of a single investment product that provides exposure to multiple funds, simplifying the investment process, and providing diversification benefits. 

In particular, the underlying funds chosen for the Cash Management model portfolios are run by renowned managers with decades of experience in managing money market and short-duration fixed income funds. The funds also have large sizes, which means that it is highly likely that their liquidity buffer will be large to cover big redemptions on any given day, including if you want to withdraw your own investments.

How have the Cash Management model portfolios performed?

The Endowus Cash Management model portfolios have demonstrated comparable performance to 1-month to 3-month US Treasury Bills, which is the closest benchmark to the portfolios in terms of:

• Duration: The model portfolios will typically carry a duration of less than or around 1 month for Simple, and less than or around 3 months for Plus.
• Investment mandate: The model portfolios invest in high-quality money market securities that are deemed relatively safe, including US Treasury Bills. 

Performance of the model portfolios

In general, the portfolios have demonstrated a “low risk, low return” characteristic. Essentially, you are only being rewarded for the risk you take — for a low-risk product like Cash Management, you can only expect a low level of return that reflects the low risk level.

• Returns accumulate slowly in small denominations, especially during low-rate environments. This is in line with the discussion earlier (i.e. that yields will be realised into returns upon maturity).
• In exchange, there is little to no downside volatility.

Given such characteristics, the Endowus Cash Management model portfolios are highly recommended for managing idle cash that you will need in the near future. You can scroll down to see a flowchart that will help you decide which model portfolio is more suitable for you.

How we built the Cash Management model portfolios

The Endowus Investment Office is a team of investment experts with more than 150 years of experience combined, 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.

Choosing between the Simple and Plus model portfolios

As a rule of thumb, Cash Management - Simple will be the most suitable for investors who:

• Have idle money that will be needed in the very near future
• Are happy to earn relatively lower levels of returns, in exchange for relatively safe investing
• Do not wish to be stressed about market volatility

Here’s a flowchart that may help you decide whether and where to invest your idle money.

Should you invest in a Cash Management model portfolio or single funds?

The Endowus Investment Office has designed the asset allocation, selected the funds, and optimised the fund allocation for the Cash Management model portfolios. The portfolio is diversified and optimised for each level of risk.

Investors can also buy single funds on the Fund Smart platform as a way to complement your existing core investments, which may include the Cash Management model portfolios. If you want to get additional exposure to certain asset classes, geographies, sectors, themes or factors, you can select the additional funds via Fund Smart.

How to create your own Cash Management model portfolio on Endowus

Here are a few simple steps to create the Endowus Cash Management model portfolios via Fund Smart. We’ll use Cash Management - Simple as an example.

Step 1: Login to your Endowus account. In the My Goals section on the sidebar, click on “+” to add a goal.

Select your investment horizon and objective for this goal, and click on “Browse funds''. Don’t have an account with Endowus Hong Kong? Get started here.

Step 2: Select a model portfolio you’re interested in, by clicking “Preview”.

You will see a list of model portfolios that are recommended for you, depending on your investment horizon, investment objective, and risk profile. (This means you might not see all of the available model portfolios if your risk profile is lower.)

Step 3: Check through the portfolio details. Click on “Continue with portfolio” if you wish to proceed.

Here, you will see details of the model portfolio such as the description, risk analysis, fees, performance, and allocations of its underlying funds. After you click on “Continue with portfolio”, you can still add funds, remove funds, and modify allocations if you want to.

‍Step 4: Allocate your funds in this portfolio, and review an analysis of it. Click on “Continue” to proceed.

You can either invest in the model portfolio as it is, or modify the allocations, add funds, and remove funds to suit your preferences and needs. 

Step 5: Set up your investment. Input the sum you want to invest, and decide whether this will be a one-time and/or recurring monthly investment. Click on either “Continue to review” or “Save goal and invest later” to proceed. 

On this page, you will see the projected outcomes, historical performance, selection criteria, underlying holdings, and warning statements. Make sure to review the warning statements carefully. You can still modify or stop any recurring monthly investments later. 

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.

At Endowus, wealth management for everyone

The Cash Management model portfolios offer investors a convenient and effective way to build a diversified portfolio that can help to minimise risk and potentially increase returns.

With digital wealth platform Endowus, 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 Cash Management model 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:

• NEW: Introducing Endowus CashUp portfolios
• Webinar: Supercharge your cash in a 5% interest rate environment
• Why invest through Endowus
• 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.

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.

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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.

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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.