Endowus Cash Smart - December Review & Update

Note: As of Nov'21, Endowus Cash Smart Core is now referred to as Endowus Cash Smart Secure. There are no changes in the underlying investment offerings.

Key takeaways

• We are providing an update on the revision of the net yield projection for Endowus Cash Smart portfolios. Cash Smart CORE goes to 0.8% ~ 1.0%, and ENHANCED to 1.4% ~ 1.6%.
• The drop in recent yields is in line with the persistent low interest rate environment and the lower yield of reinvestment opportunities around the world.

The revised yields are still much more attractive than the savings or deposit options available in Singapore

How has Endowus Cash Smart performed since launch?

Endowus Cash Smart Portfolio Performance

July 1, 2020 to Dec 31, 2020

As you can see from the above chart, the performance of the two Cash Smart products have been steady and strong since the launch on 1 July. The chart above shows the trend while the table below shows the monthly and overall performance. Actual net returns since launch and annualised rate of returns are higher than the projected yield numbers we had shared with our clients at the time of launch.

Endowus Cash Smart has performed better than the projected yield at the time of launch

Endowus Cash Smart was launched on 1 July. All performance numbers are to 31st December 2020. Net returns are after fund level fees, trailer fee rebate, and Endowus access fee.

Both Cash Smart Core and Enhanced did better than the projected yield at the time of launch. Enhanced had more pronounced returns because the solution includes a short duration fixed income fund with greater duration exposure. In this low interest rate environment, to get higher yield, investors have to take on higher duration or credit risk. It is always important to balance the risk and reward, and we believe the improvement in yield outweighs the risks for the Enhanced solution.

We have highlighted the maximum drawdown risk of the Enhanced product compared to Core and why the yield on Enhanced is higher. It is about efficiency. There is a slightly higher risk and that has resulted in a boost in returns. The returns have surely outweighed the risk in this case.

Interest rates continue to fall

Major interest rates and deposit rates keep heading lower

Interest rates collapsed globally in March 2020 and have continued to fall in the subsequent months. We are at or close to the lowest levels in history, especially in Singapore. The 12 month rates - whether it is SIBOR, government bills, savings accounts Singapore Savings Bonds or bank fixed deposits - are all well below 1% and remain significantly lower than what you can get from the Endowus Cash Smart solutions, as the above chart shows.
Further, with a bank fixed deposit, your money is locked-up and you only get to see the interest and the money after 12 months. If for whatever reason you need to access the money and cancel the fixed deposit, you lose all the interest earned thus far. In comparison Endowus Cash Smart allows accrual of returns on a daily basis.

Endowus Cash Smart portfolios yield remain attractive

The below chart shows a comparison of the latest Cash Smart yields with those of several fixed deposit options. Even with the latest revised lower yields, Endowus Cash Smart Core and Enhanced remain extremely attractive alternatives for short term liquidity management.

The funds in Endowus' Cash Smart Core and Enhanced portfolios invest in fixed institutional deposits, money market instruments, and short duration fixed income instruments, and by allocating to these instruments, the portfolios are able to provide a boost to yield while maintaining daily liquidity. Investors need to understand that the portfolios are not bulletproof to the falling interest rate environment: for example, when the underlying holdings mature, the fund managers have to reinvest the proceeds in new instruments which would most likely be paying a lower yield than before. However, the portfolios are managed to take incremental risk to get additional return, and to defend the return as much as possible.

It is to be noted that we have been emphasising that the portfolios are not risk-free - we are taking calculated risks to get the additional return, and we believe that the trade off is worth it.

Comparison of Endowus Cash Smart projected yields with deposits

Cash Smart underlying funds' monthly gross projected yields

Giving access to information and yield transparently

We cannot make a prediction on the future direction of interest rates. However, we will continue to revise down or up, whenever the net yield moves, and to come up with innovative solutions to meet our clients' needs. Endowus receives weekly updates from our partner fund managers and will update any changes; but often these changes are marginal. If there is a meaningful shift in yield, we will continue to make those changes to accurately reflect projected yields and at least on a monthly basis.

In addition, we are in constant search for better fund options, and better ways to serve our clients; we will continue to focus on providing robust advice to the best interest of our clients with the highest degree of integrity and transparency.

If you have any other questions or need advice from one of our MAS-licensed representatives please reach out at support@endowus.com or visit our Cash Smart landing page here. If you would like to do more research on the Cash Smart products, please find the in-depth Endowus Investment Office research Insights article here.

Get a head start on financial literacy & general investing by watching our Investing 101 with Endowus 4-part series here.

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Investment involves risk. Past performance is not necessarily a guide to future performance or returns. 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.

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 Endow.us Pte. Ltd (“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 Pte. Ltd., 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 (i) 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.

Investment into collective investment schemes: Please refer to respective funds’ prospectuses for details of the funds, their related fees, charges and risk factors, The listing of units of the fund on a stock exchange does not guarantee a liquid market for the units. Before making an investment decision, you are reminded to refer to the relevant prospectus for specific risk considerations.

For Cash Smart Secure, Cash Smart Enhanced, Cash Smart Ultra: It is not a bank deposit and not capital guaranteed, and is subject to investment risks, including the possible loss of the principal amount invested. Investment products are not insured products under the provisions of the Deposit Insurance and Policy Owners Protection Schemes Act 2011 of Singapore and are not eligible for deposit insurance coverage under the Deposit Insurance Scheme. Interest rates are indicative and subject to change at any time.

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.

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