NEW: Introducing Endowus CashUp portfolios

This quarter, we are excited to share that Endowus Hong Kong is launching an upgrade to our Cash Management model portfolios, which will be rebranded as the Endowus CashUp series, where we will continue to provide two portfolios of choice for our clients, CashUp Simple and CashUp Plus.

For our CashUp Simple portfolio (previously known as Cash Management - Simple), we will be introducing a strategic change to include the HSBC Global Money US Dollar Fund into the model portfolio.

This update will bring forth a range of enhancements and benefits to the CashUp Simple.

These include reduced portfolio-level fees, improved historical risk metrics, and increased subscription operational efficiency particularly for small subscription amounts, while preserving all the core strengths of the portfolio – short duration, global diversification, and attractive total return and yield.

​​Key improvements to Endowus CashUp Simple (previously known was Endowus Cash Management - Simple) 

Improvement 1 - Lower fees

We are introducing a fund with a lower expense ratio into CashUp Simple. This translates to lower overall portfolio-level fees of 3 bps (as of October 2023). 

The compounded impact of fees on your returns is critical to investment success, especially for money market funds that are characterised by a relatively lower level of returns compared to other riskier asset classes such as equities or fixed income.

Improvement 2 - Maintaining similar levels of historical returns & yield, and composition of underlying securities

CashUp Simple is designed to be a relatively low-risk solution for your idle cash. Its underlying funds adopt a nimble approach in managing duration, and the portfolio’s key strength lies in its ability to capture prevailing market yields and deliver favourable total return.

The new version of the portfolio has historically exhibited similar levels of total return and yield as the current version, while offering the benefits of lower fees and greater operational efficiencies as detailed in the sections above. 

We also expect the composition of the updated overall portfolio to be similar to the current version, invested mainly in ultra short-duration money market securities and time deposits:

Improvement 3 - Large NAV issue solved

One of our goals in this update is to also address an operational issue as the result of the large Net Asset Value (“NAV”) of one of the previous underlying funds. In this new configuration, clients are now able to  invest in smaller amounts from the improved operational efficiency.

Portfolio characteristics

Let’s once again review the key characteristics of the 2 Endowus CashUp portfolios (CashUp Simple and CashUp Plus), which have been designed to meet the different cash management needs of investors. 

We would like to highlight that 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 may recover within days.

​​Why invest in Endowus CashUp? 

The Cashup 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 constituent funds of the Endowus CashUp portfolios (HSBC Global Money US Dollar Fund and Ping An Money Market Fund) 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: All the funds selected into Endowus CashUp series are subject to mandates by regulators in Hong Kong and Europe 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 HSBC Global Money US Dollar Fund and Ping An Money Market Fund, 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 likely to be stable – meaning that they are unlikely to produce negative returns, and even in the event of losses, they tend to be small and recover within days. The resulting portfolio tends to have a low duration, which means they are also less affected by rate risks.

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

• CashUp Simple has delivered relatively stable and safer returns.
• CashUp Plus has delivered higher total returns than Simple, although it comes with higher volatility. Nevertheless, losses have been minimal 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 CashUp 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 Cashup 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 CashUp 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 CashUp 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 both CashUp Simple and CashUp Plus 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 large redemptions on any given day, including if you want to withdraw your own investments.

​​How has Endowus CashUp performed? 

Endowus CashUp 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: CashUp 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: CashUp portfolios invest in high-quality money market securities that are deemed relatively safe, including US Treasury Bills.
  

Performance of Endowus CashUp 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 CashUp, you can only expect a low level of return that reflects the low risk level.

Given such characteristics, the Endowus CashUp series are highly recommended for managing idle cash that you will need in the near future. Below is a flowchart that will help you decide which portfolio is more suitable for you.

For existing portfolio holders – a guide to implement the portfolio update

For new investors into CashUp portfolios, you will immediately be able to subscribe for the enhanced versions of CashUp Simple and CashUp Plus via Endowus Fund Smart.

For existing holders of the 2 portfolios, making this portfolio change is seamless. You can initiate the switch by logging into your Endowus account and following a few simple steps. 

Our client advisors team are always available to assist you throughout the process, or you can email support.hk@endowus.com.

Enjoy lower fees, stronger long-term gains with Endowus

The Endowus Investment Office is constantly monitoring your advised portfolios and searching for new options that will improve these portfolios. To get started on Endowus, click here.

Read more:

• Optimising your savings: money market funds vs time deposits
• Webinar: Supercharge your cash savings in a 5% interest rate environment

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