Key takeaways

  • We are providing an update on the revision of the net yield projection for Endowus Cash Smart portfolios. Core  goes to 0.9% ~ 1.0%, and Enhanced to 1.5% ~ 1.7%.
  • 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
  • For those seeking higher yield, we are introducing Cash Management (Ultra), which offers an additional option for investors at a higher yield of 1.7~1.9%, by taking incremental risk to gain yield.

How has Endowus Cash Smart performed since launch?

Endowus Cash Smart Portfolio Performance

July 1, 2020 to Nov 27, 2020

Source: Endowus Research, MorningStar

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 is higher than the projected yield numbers we had shared with our clients at the time of launch.

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

Source: Endowus Research, Bloomberg Endowus Cash Smart was launched on 1 July. All performance numbers are to 30th November 2020. Net returns are after fund level fees, trailer fee rebate, and Endowus access fee.

Endowus Cash Smart was launched on 1 July. All performance numbers are to 27th November 2020.

While both 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 outweighed the risk in this case.

Interest rates continue to fall

Major interest rates and deposit rates keep heading lower

Source: Endowus Research, Bloomberg

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, 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.  

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. However, 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

The downward revision of Cash Smart yields are not unexpected

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 these are not bulletproof from 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.  In November, we saw a pretty significant dip in Fullerton Cash Fund’s projected yield from 0.6% to 0.4% due to a few of the longer dated and higher yielding institutional fixed deposits maturing and being replaced by deposits with a lower rate.

The initial fall in interest rates, however, did provide a boost to the total return of LGI Enhanced Liquidity Fund and United SGD Fund in the form of capital appreciation. This is reflected in the significant outperformance of these two funds from July to September above the projected yields. Both funds have investments in short term bonds, whose price will increase when interest rates fall.

Although this should not technically reduce the yield, the upside in terms of capital appreciation may be capped to a lower level. In November, we saw the projected yield of United SGD fund dropping from 2.0% to 1.8% as a result of 1) some bonds maturing and being replaced with lower-yielding bonds and 2) increase in bond valuation, which results in mark to market gains

Cash Smart underlying funds' monthly  gross projected yields

Source: Endowus Research, Bloomberg

Introducing Cash Management (Ultra)

While the Endowus Cash Smart Enhanced product still generates a relatively high yield, it has been gradually coming down. We understand that these recent drop in yields, while very natural, might be frustrating for some investors. For clients who would like to aim for a higher yield enhancement through taking incremental portfolio risk, we are introducing Cash Management (Ultra) as an alternative to Cash Smart Enhanced.

You can build it on our curated and personalised Fund Smart platform immediately. First go to your Endowus account and create the Cash Management (Ultra) portfolio by selecting Add Goal. Then choose the Cash Management option and select the two funds at a 70%:30% ratio in order to target a higher yield for your cash.

You can read more about our new Endowus Cash Management (Ultra) portfolio here.

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 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.