- Endowus' 2020 CPF portfolios returned 15.7% for 100% equities, and 6.7% for 100% fixed income, outperforming the average returns of CPFIS-included funds by 2.2% and 0.4%, respectively.
- Cumulative returns from 2018 to 2020 for Endowus CPF portfolios were 35.6% for 100% equities, and 13.4% for 100% fixed income.* For equities, this represents outperformance of 14.8% cumulatively (4.2% outperformance on an annualised basis), driven by Endowus' exclusive access to Vanguard-managed low cost passive funds that track the S&P 500, and MSCI World indices.
- Endowus is the first and only digital advisor for the CPF Investment Scheme (CPFIS), bringing the CPF investment experience 100% seamlessly online. The diversified, passive, strategic asset allocation has proven to generate strong and stable long-term performance.
*Note: Endowus CPF Portfolios were available from Oct 2019. In order to show performance of the portfolio prior, we use the returns history of the same unit trusts or best proxy in the same passive allocations (no assumed tactical changes) to mimic how Endowus would have performed. Data and performance returns shown are for illustrative purposes only and is not and cannot be indicative of future results.
Endowus CPF portfolios have outperformed
Investors in CPFIS-included funds saw an average return of 11.11% in 2020 according to the CPF Board commissioned quarterly Refinitiv Lipper report published on 16 March 2021. The Endowus CPF Portfolios outperformed the average returns of the 86 CPFIS-included funds in 2020.
The Endowus CPF 100% equities portfolio returned 15.7% in 2020 versus 13.5% for the average of CPFIS-included funds, an outperformance of 2.2% in one year. The Endowus CPF 100% fixed income portfolio also outperformed the average CPFIS-included fixed income funds, generating a 6.7% return compared to 6.3% for the average.
The Endowus CPF balanced portfolio (60% equities and 40% fixed income) returned 12.4%, versus the calculated average returns of 10.6% for an equivalent portfolio of CPFIS-included funds.
The table below shows that through compounding, the cumulative effect of performance over a 3 year period increases quite significantly. If you compare these returns to the CPF Ordinary Account (CPF-OA) yield of 2.5% and even the Special Account's 4%, the Endowus portfolios have generated meaningful and significant excess returns for CPF members.
2020 was challenging for investors with a market selloff triggered in the early part of the year due to COVID-19, followed by an unprecedented recovery in the second half boosted by stimulus from governments and central banks globally. For investors who remained invested and were disciplined in their investment strategy, they benefited and have continued to achieve returns higher than the CPF-OA interest rate of 2.5%.
The performance numbers for 2020 demonstrate that fund selection continues to make a meaningful difference to portfolio returns for investors even after accounting for fees. Fund selection within an evidence-based approach means that it is important to build diversified portfolios and monitor both the risks as well as the costs associated with investments.
Endowus' evidence-based approach to portfolio construction and fund selection
Taking an evidence-based approach to investing means analysing empirical data and time-tested academic research, and applying it in a systematic manner rather than trying to speculate or outguess other market participants.
We structure our portfolios to capture these drivers within a broad diversification benefit across geography and sector to maintain a passive strategic asset allocation and the resulting optimal market exposure for each client. We believe in creating diversified investment portfolios which generate the highest possible expected return for every level of risk taken by an investor. This means continuously searching the investment universe for products that will improve risk-return tradeoff in our portfolios.
Endowus exclusive Vanguard-managed passive funds make a difference
For example, Endowus introduced low cost, passive index solutions for CPFIS investors. These include the Vanguard managed Infinity US 500 Stock Index Fund and the Global Stock Index Fund, denominated in Singapore Dollars by Lion Global Investors. Both funds are included as a core allocation in the Endowus CPF portfolios and they remain the only passive index funds available on the CPFIS platform and both are still exclusive to the Endowus platform. It is this continuous focus of working to provide access to best-in-class solutions for all CPF members that can help investors achieve stronger returns.
The reason it is exclusive to Endowus is because Endowus rebates 100% to clients all of the trailer fees (kickback commissions paid by fund managers to the distributors like banks, brokers, fund platforms, such as FundSuperMart or Dollardex, who generate large revenues at the expense of retail customers and CPF members). This takes the funds to the lowest net fee in Singapore and unavailable on CPFIS to other platforms or distributors as they are above the CPF cap on total expense ratios for passive index funds of 0.5%.
Endowus CPF portfolios held up well through 2 major market falls
The chart above shows that despite two big market falls in 2018 and again in 2020, it paid to remain invested through the volatility. Longer term charts clearly show the level of outperformance of globally diversified portfolios over the CPF interest rates.
Reducing fees is important for your CPF returns
Costs also dramatically affect long-term returns for the end investor and that is why Endowus leverages our collective scale to reduce costs at every level possible. An efficient selection of lowest cost fee structure funds and incorporating all trading execution into our fees allows us to achieve a lower total fee for our customers. Some robo-advisors have additional hidden fees or expenses such as taking a spread on currency conversion or withholding tax on dividends, whereas Endowus has transparent pricing and fees.
Reducing the cost of investments has a huge compounding effect and shows how much of a drag costs can be. As an illustration, a 1% cost saving per annum will compound and provide excess returns of 280% over 30 years. CPF savings are meant for the long term and putting them to work with investment experts can help grow your nest egg ahead of retirement.
CPF investors, in particular, should review what they pay to fund managers and investment advisors. Fees can come in the form of total expense ratios charged by the fund managers as well as those levied by intermediaries in the form of platform fees and sales charges. Investors may be presented with funds that pay the financial advisers the highest trailer fees rather than the ones that are most suitable for their investment objectives.
Unlike in the UK and EU where regulations (UK Retail Distribution Regulation & EU MiFID II) have eliminated trailer fees altogether for financial advisers, similar regulations have not been implemented in Asia. Hence the independence of financial advisers in this region is an area that investors need to consider. While the CPF Board has eliminated sales charges levied by financial advisers as of 1 Oct 2020, financial advisers remunerated by trailer fees is still the norm. Endowus is currently the only digital advisory platform that does not receive any trailer fees in order to be truly independent in our recommendations. Endowus charges CPF investors 0.4% per annum to access our fund selection and portfolio construction capabilities. In addition, Endowus provides advised portfolios that allow CPF investors to conveniently build their core allocation aligned with their long term investment objectives.
The case for investing your CPF-OA is clear
CPF-OA is the perfect source of money to be investing for the long term with the monthly regular savings from salary and the fact that you cannot touch it or take it out for decades. By tolerating volatility and investing your CPF-OA savings, you can target higher expected returns and reap enormous benefits in the long-term.
Through Endowus you have an easy way to set up a ready made investment portfolio solution that provides a greater opportunity to beat the 2.5% OA interest rate threshold by exposing yourself to broad, globally diversified and low cost portfolios for the long term.
Go deeper: Should I invest my CPF-OA?
If you have not embarked on your CPF investing journey with Endowus, you can begin investing your CPF-OA into Endowus portfolios by creating an account below or adding a new goal in your account if you are an existing Endowus client. If you would like to find out more about the Endowus CPF investing options, click here to visit our Endowus CPF investing page on our website, or jump straight to our CPF investment portfolio returns.
Get a head start on financial literacy & general investing by watching our Investing 101 with Endowus 4-part series here.
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.
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