Endowus Fund Smart: An in-depth review from our Investment Office

Today, we are excited to introduce Endowus Fund Smart* — a new investment solution on the Endowus wealth platform that allows you to build customisable portfolios with direct access to curated institutional best-in-class funds from the world's leading asset managers.

Fund Smart — a new way to invest on the Endowus platform

Are you confused or dumbfounded about the several thousands of funds out there to choose from? Well, we cut it down to a curated list of just over 50 of the best funds available for each asset class on the Fund Smart platform. These best-in-class funds have been pre-screened, and pre-selected by Endowus just for you.

Why? Because we know being presented with too many options is a bad thing when it comes to investing. It paralyses us into inaction, or analysis paralysis. It also often leads to clients getting pushed to buy the worst funds that are often the flavour of the month but lead to poor outcomes. The distributor (bank, broker, or fund platform) is paid a commission — called trailer fees — on the funds they sell to clients, making their advice financially misaligned with the end clients.

We believe that by giving a curated list aligned to your personal interest and risk tolerance, you will be able to invest better to live better today. This is why we created Endowus Fund Smart.

Fund manager & fund selection due diligence process

The Endowus Investment Office as a trusted advisor

Large institutions hire what are called fund of funds (FoF) managers to select the best funds for them to build into a portfolio — an exclusive service for the biggest sovereign wealth funds and the largest global institutional investors.

We've already done most of the hard work for you in screening and doing due diligence to curate the best funds for you to choose from. You can add criteria that is important to you across the various asset classes, geographies, sectors, thematics, styles, and factors.

When it comes to investing, it can be counter-productive to have a plethora of options. In that, you will need a trusted advisor to help you select the best choices — a team that's entirely aligned to helping you grow your wealth with the right incentives.

The fund selection process

The Endowus Investment Office has painstakingly selected the best-in-class and the best-performing funds from the largest global and local fund managers.

Most people may think they understand what "best-performing" means, but this is in fact is not clearly defined. It can mean different things to different people, and which period you look at in performance could make a fund look good or bad. It is therefore important to look at performances over the longer term and through cycles.

Normally, distributors tend to push the funds that have performed the best in the past one year, three years, or even just in the past few months. This is no different from chasing the latest hot stock tips, and it's not the type of investments we want to recommend to our clients.

We define best-in-class as the highest integrity funds for each asset class or sub-category that exhibit the following characteristics:

• Consistent in what they say and do. This is based on their investment philosophy, strategy, implementation, and execution.
• Able to generate returns close to or above its relevant benchmarks consistently without taking unnecessary risks. The returns are always adjusted for the risks, and each risk has to be compensated in the returns it generates. Consistency over a meaningfully long period of time is important.
• Good managers of risk, in terms of risks in the market, volatility, liquidity, style, duration, default, regulatory, FX, concentration, reinvestment, and so on. You need a certain scale, experience, and expertise in managing risk well.
• Security and stability in the process and setup of the company and the fund, the investment team, the lead portfolio manager, investment and risk management procedures, and trading and execution capabilities.
• For passive and passive plus or systematic quant strategies, the cost is paramount, as they are largely index or passive in nature. But this applies to all funds whether passive or active; Morningstar research has shown that cost is the single most important determinant of future returns. Therefore, being cost efficient and providing good funds at a low cost is a key factor of being a best-in-class fund.

Endowus curated Fund Smart vs other fund platforms with too many costly choices

Great fund management is not new. At Endowus, we stand on the shoulders of giants, working with the largest global and local asset managers with proven track records, safeguards, and efficiencies of scale rather than trying to reinvent the wheel.

These are fund managers who are aligned with the mission and vision of Endowus to help you save and invest better so you can live easier today and better tomorrow. We want to bring a higher level of integrity and a higher quality performance, all at the lowest cost achievable on the Endowus Fund Smart platform.

All of the best strategies and funds are immediately available on Fund Smart, from names that you are familiar with, such as Dimensional, PIMCO, Vanguard, Schroders, Franklin Templeton, Eastspring, Fidelity, Aberdeen Standard, PineBridge, Legg Mason, First Sentier (previously First State), Fullerton, Lion Global, Nikko, and UOB Asset Management.

Invest in Endowus advised portfolios when in doubt

Our core suite of advised portfolios remains the best way to gain globally diversified, low-cost market exposure to generate long-term returns. However, we have listened to many current and potential clients, and we recognise that each person has varying needs, personal circumstances, and different goals requiring different levels of customisation.

Now on the Fund Smart platform you can take advice or follow a model portfolio suggested by us, or build bespoke or do-it-yourself portfolios. You make the decision, while being advised by us.

Endowus Fund Smart is a revolutionary way to build your personal portfolio with guardrails in place. This complements our advised portfolios, which are meant to make up the core component of your investment portfolio. You can build around the advised portfolios, or start with them first and tweak them later.

Learn more about how to apply the core-satellite portfolio concept with strategic and tactical asset allocation strategies.

Access model portfolios with Fund Smart

You can utilise the Endowus Core+ strategy of using our globally-diversified, low-cost advised portfolios as the core allocation to equities and fixed income, plus Fund Smart to create satellite portfolios to best suit your needs, risk, and goals.

For the satellite portions of your portfolio, you can also use model portfolios on the Fund Smart Platform, under the recommendation of Endowus Investment Office.

You can construct personalised portfolios using funds that have been diligently screened by Endowus for your CPF, Cash savings, or SRS all seamlessly on the Endowus platform.

For further details about the Endowus core-satellite investment strategy, click here.

How Endowus portfolios can be personalised for your needs and goals

It is our job at Endowus to get through the noise and hand-pick best-in-class funds, at the lowest cost achievable, so you can create personalised portfolios suitable for your goals. So here's what can you do on the Endowus Fund Smart platform:

Examples of model portfolios with Fund Smart

Here are some more specific use cases that you can build on the Fund Smart platform, under the recommendation of the Endowus Investment Office.

1. Customised Endowus advised portfolio

Customise the risk levels and asset allocation of existing Endowus advised portfolios. Previously, you had a choice of only six risk weightings, but now a 50:50 or 70:30 portfolio — or everything in between, in whatever ratio you see fit, in any risk weighting of your choice — can be created on Fund Smart.

Endowus Cash/SRS advised portfolios and risk-based asset allocations:

Endowus CPF-OA advised portfolios and risk-based asset allocations:

2. DIY cash management solutions

Create or replicate any kind of cash management account out there with an appropriate risk and target yield in mind, or even build a new higher-yielding cahs management portfolio for yourself.

On the Endowus platform, you can create or replicate any cash solutions from robo-advisors or fund platforms, together with all your other investment needs, so there is no need to go anywhere else, knowing that the fund-level costs here will be the lowest available. You can even create all seven of them if you really want to — although we would advise against that.

All you need is probably Cash Smart Secure (previously named Cash Smart Core) and Cash Smart Enhanced to meet your actual needs. That is why we created the two best cash management solutions in this way, which sets us apart from the other robos and fund platforms.

3. Endowus Ultra Defensive Portfolio

We are launching a new Ultra Defensive Portfolio (UDP) positioned between a 100% fixed income portfolio, which has a worst 12-month percentage loss of 12%, and our Cash Smart liquidity management accounts, which have a worst case outcome of 3.5%.

To fill the gap between the 3.5% and the 12% risk numbers, we are introducing the UDP to be a better than cash but safer than fixed income portfolio.

UDP is the right choice for you if you want to boost yield to be higher than Cash Smart by taking some more risk, or if you want to protect your capital and avoid volatility in the short term by going even more defensive than the 100% fixed income portfolio. Read more about UDP here.

Endowus Ultra Defensive Portfolio in SGD-hedged institutional share class:

4. Single fund manager model portfolios

You can also create a portfolio from a single fund manager. Examples include a 100% Dimensional-only equities or multi-asset portfolio, or a 100% PIMCO fixed-income portfolio.

Dimensional Fund Advisors:

PIMCO:

5. Other thematic investing portfolios

Many more options and model portfolios will be released in the future. These may include sectors or thematic funds — ESG (environment, social, governance) or SRI (socially responsible investing), technology, dividends, income, real estate, commodities, and more.

To learn more about thematic investing and the Endowus Megatrends Portfolio, follow this link.

The Endowus cost advantage

It doesn't matter whether you have $10,000 in the DBS account or $10 million in a UBS private banking account — the experience is often broken with poor advice, with people pushing you the wrong types of funds that are not suitable for you and at an exorbitant cost that takes away from your returns and leads to poor outcomes.

Cost and returns are two sides of the same coin. By paying high costs, you are giving up your returns, and lowering the cost has an immediate substantial and direct boost to your returns. That is why Endowus is so fixated about trying to reduce the cost of investing at every layer and as much as possible.

Cost comparison example for a PIMCO fund

Cost comparison example for a CPF portfolio

Cost comparison for a typical cash management account

Helping you understand and build the portfolio that's suitable for you

With Fund Smart, we have included useful advisory tools to help you build your portfolios with full transparency on the most important information you require.

When you invest in a fund through a DIY fund platform, bank, or broker, you are often making investment decisions without the necessary information or advice needed to invest in the most appropriate way for you.

For example, they do not:

1. Prompt you to assess your risk tolerance when you choose your funds;
2. Give enough information on historical returns and projected outcomes at the portfolio level and often even at the single fund level;
3. Show what the overall portfolio looks like with the top underlying holdings, sectoral, and geographical exposure of the portfolio;
4. Provide transparency on the fees you are paying and what the platforms are receiving in the form of kickback commissions from the fund management companies.

As a firm believer of improving your investment process and outcomes, we embrace a higher standard of advice, transparency, and goal-based investing: we want you to invest based on your risk tolerance.

When you first set up a Fund Smart goal, you first have to indicate your maximum drawdown (for cash management solutions) or loss tolerance (for investments).

After indicating your risk/loss tolerance, you will be guided to choose your funds, and the percentage allocation of it. You can search for fund rationales and other necessary fund documents. On the fund rationale page are also links to the fund management company's fund page with more information and documents to help you make a better-informed decision.

Based on your risk tolerance and your fund choice, we will intelligently calculate to identify whether your chosen portfolio is aligned with your stated risk and loss tolerance and goal.

Our engines can immediately calculate the necessary information, including historical returns, underlying portfolio holdings and positions, projected outcomes, and full transparency on fees. The advice will help you understand your needs and your portfolio better.

You will have full transparency on fees upfront so you know exactly who you are paying and how much. We will not take any commissions from fund managers or other product providers that may influence our decision and misalign us from serving your best interest.

There are also no additional fees or charges on the Endowus platform. Other robo-advisors regularly charge a 0.08% to 0.1% spread on your FX transactions when they convert to US dollars (USD) to access US-listed exchange-traded funds (ETFs). We do not have any other charges, and show everything transparently.

Conclusion — what's different about Endowus?

Both our Cash Smart and Fund Smart solutions come from the deep desire to meet the needs of our clients in managing their wealth. It's difficult enough trying to do it alone. Endowus is the adviser that will always be enabling solutions that work for you and fighting for you on your side.

We are constantly looking at ways to invest better by:

• Providing direct and curated access to institutional share-class, trailer-free funds from the world's leading asset managers
• Helping you understand the expected returns and risks of a portfolio
• Automated monitoring and rebalancing, all the time
• Keeping fees as low as possible with no sales fees, no transaction fees, and Endowus' industry-first 100% trailer fee rebates
• Ensuring safety and security with assets held securely in your own name, at UOB Kay Hian, Singapore's largest broker
• Delivering convenience on the 100% digital Endowus platform, investible with Cash, CPF & SRS

We started Endowus with a mission to help people save and invest better and prepare for their future, so they can live easier today, and better tomorrow. Today, thousands entrust their wealth with Endowus — investing their Cash, CPF & SRS in optimised portfolios designed for their wealth goals.

If you need some help, we have globally diversified, low-cost, Endowus advised and model portfolios to help you get started. You can replicate it exactly or tweak it later to your liking on Fund Smart if you wish to. All are created with the best-in-class funds screened and pre-selected in the Endowus platform.

If you have more questions, our team of MAS-licensed financial advisers are here to walk you through our platform and advise you on your wealth management needs. Schedule a call for personalised advice here.

With Endowus, you can build bespoke portfolios — just like the big institutions and private banks do for large clients — at a cost that is unmatched by any fintech startup or traditional player.

How to start using Fund Smart:

1. Log in to your Endowus account
2. Add a new goal
3. Select "Fund Smart" and follow the instructions.
   

*By selecting Fund Smart, you will need to acknowledge that you do not wish to obtain advice or a recommendation from Endowus. Full details of the required acknowledgement will be made available to you when you create your Fund Smart portfolio on our platform. Our investment philosophy and approach may be found here.

Next on the Endowus Fin.Lit Academy

Read the next article in the curriculum: Learn about ESG investing

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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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