Endowus Core-Flagship Cash/SRS Portfolio

‍The 100% Equity Portfolio gained 2.7% in October, underperforming the broader equity benchmark by 0.3%.

• October saw lower-than-expected US inflation numbers, causing the Fed to deliver another 25bps rate cut to bring their target range to 3.75%-4.00%. Additionally, the month also saw another strong corporate earnings season. Against this backdrop, global equities continued their rally during the month, led by US mega-cap technology stocks. However, fears of an AI bubble loomed, leading to a sell-off towards the end of the month as investors grew concerned about overvaluation. Overall, global equities ended the month up 3.0%.
• The 100% Equity Portfolio underperformed the global equity benchmark due to its structural overweight to value and small cap stocks, which struggled during the month.
• Within the Portfolio, the top performer was the Amundi Index MSCI Emerging Markets Fund which delivered 5.2%, on the back of the good performance of emerging market equities. The weakest performer was the Dimensional Pacific Basin Small Companies Fund, which delivered minus 0.7%. The Fund struggled due to its overweight to Japan small cap stocks. Although Japan stocks saw good performance in October, its growth was driven by large cap stocks while small cap stocks struggled.

The 100% Fixed Income Portfolio gained 1.0% in October, outperforming the broader fixed income market by 0.5%

• Global government bonds generally ended October on a positive note, while emerging market bonds continued to perform well and led the pack. On the other hand, investment grade and high yield credit underperformed the global bond market as credit spreads widened during the month. Overall, global bonds ended the month up 0.5%. 
• The Flagship 100% Fixed Income Portfolio outperformed the broader fixed income market due to its overweight to emerging market bonds.
• Within the portfolio, the iShares Emerging Markets Government Bond Index Fund was the strongest performer in October, delivering 2.9%. On the other hand, the iShares Global Aggregate 1-5 Year Bond Index Fund was the weakest performer, ending the month up 0.2%. The Fund lagged the broader fixed income market due to its shorter duration.

Endowus Core-Flagship CPF Portfolio

‍The 100% Equity Portfolio returned 3.1% in October, outperforming the global equity benchmark slightly by 0.1%

• The Flagship CPF 100% Equity Portfolio outperformed its benchmark in October due to its overweight to emerging market and US equities, which outpaced the broader equities market.
• Within the portfolio, the Schroder Global Emerging Market Opportunities Fund was the strongest performing fund during the month, delivering 5.2%, driven by the good performance of emerging market equities. On the other hand, the Dimensional Global Core Equity III Fund was the weakest performer, ending the month up 1.8%. The Fund underperformed due to its overweight to value and small cap stocks which struggled during the month.

‍The 100% Fixed Income Portfolio delivered 0.5% in October, performing in line with the broader fixed income market.

• The portfolio’s performance was weighed down by its overweight to Singapore bonds. While Singapore bonds have performed well this year, it lost some traction and delivered modest gains in October.
• Within the portfolio, the Dimensional Global Core Fixed Income III Fund benefited from its longer duration exposure and was the best performing fund in October, ending the month up 0.6%. On the other hand, the United SGD Fund was the weakest performer, ending the month up 0.2%. The Fund struggled due to its shorter duration and overweight to Singapore bonds.

Endowus Income Portfolios

‍The Stable Income Portfolio delivered 0.4% return in October, in line with the broader credit market.

• Flexible income funds exhibited mixed performance in October, with PIMCO GIS Income Fund leading the pact (+0.9%), benefiting from its longer duration positioning in the US and UK. On the other hand, JPM Income Fund lagged with its shorter duration positioning and long exposure to JPY. 
• The Portfolio’s allocation to Asian bond funds slightly detracted from the relative performance. 

The Higher Income Portfolio gained 0.6% in October, underperforming the 20-80 benchmark

• The fixed income portion of the portfolio slightly underperformed the overall credit market, with the main detractor being its allocation to the high yield market as spread widened in October. 
• The equity portion of the portfolio underperformed the global equity market. The main detractor was its allocation to real assets, which underperformed the overall equity market. Its overweight position in emerging markets equities helped to offset some underperformance. 

The Future Income Portfolio gained 1.2% in October, underperforming the 40-60 benchmark

• Its fixed income component performed in line with reasons similar to those of the Stable Income.
• The equity portion underperformed the global equity market due to its tilt towards low volatility stocks, which delivered weak performance in October. 

Current target payout update:

In September, we revised downwards the current target payout of Higher Income Portfolio to 5-6%. The recent increase in hedging cost between SGD and USD pair has caused certain fund managers to lower the payout, impacting the overall payout levels across all three income portfolios. This in particular has caused Higher Income Portfolio’s payout yield to dip below the prior target payout range. In light of the prevailing interest rate cycle, it is only prudent to lower the current target payout range of the Higher Income Portfolio. 

Investment grade flexible income funds continue to be able to generate income that’s akin to high yield funds in the current environment where high yield spreads are particularly tight. In light of this, we are comfortable with the Higher Income Portfolio generating an income level that is similar to that of Stable Income. It is important to note that the Higher Income Portfolio has delivered better growth in terms of total return than Stable Income, with the prudent addition of credit and equity risk. This means that after receiving the income, investors in the Higher Income Portfolio would have seen a stronger increase in their capital year-to-date. 

We are monitoring and will take actions to improve the portfolios if we believe there are better building blocks/ is room to optimise the portfolios further. 

Endowus Cash Smart Portfolios

‍Cash Smart Secure continued to generate stable and positive returns in October. 

• The Cash Smart Secure Portfolio maintained its stable return profile, posting a 0.1% gain in October. 
• Both the underlying funds, Fullerton SGD Cash Fund and LionGlobal SGD Enhanced Liquidity Fund, returned 0.1% respectively. 

Cash Smart Enhanced continued to provide stable returns in October

• Cash Smart Enhanced generated a return of 0.2% during the month.
• UOBAM United SGD Fund was the best performer, ending the month up 0.2%. The other two cash and money market funds, Fullerton SGD Cash Fund and LionGlobal SGD Enhanced Liquidity Fund, both gained 0.1%.

Cash Smart Ultra generated positive returns in October, though its performance fell short of expectations according to its risk level.

• Cash Smart Ultra achieved a return of 0.2% in October.
• All underlying funds posted positive returns for the month. Although the short-duration bond funds outperformed the cash and money market funds in the portfolio, the additional returns were modest compared to their additional duration exposure. This is because most of the short-duration bond funds are mainly invested in Singapore bonds, which have compressed yields as Singapore bonds experienced a continued decline in yields this year.
• The best performing fund was the PIMCO Low Duration Income Fund, which returned 0.7%, as it benefitted from its exposure to US securitised bonds that have a higher yield. 

‍Please note: There has been a change in the benchmark due to the discontinuation of the 3-month SIBOR. The new benchmarks feature higher returns than SIBOR, but our Cash Smart Portfolios have tended to outperform them across various periods.

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