Deep Dive: Endowus Real Assets Portfolio

We are pleased to announce our latest recommended portfolio change (RPC) where we will be launching the upgraded Endowus Real Assets Portfolio to replace the Endowus Global Real Estate Portfolio.  

The Endowus Real Assets Portfolio is designed to provide investors with exposure to real assets - commodities, natural resources equities, infrastructure and real estate.  

The table below shows the core investment philosophy of the updated Real Assets Portfolio. 

The latest recommended portfolio change is part of Endowus’ commitment to source funds that will optimise your portfolios. You can choose to accept or reject the recommended changes (Please refer to the FAQs at the end of this article). 

Read more: What are real assets?

Funds in the Real Assets Portfolio

Using the old Global Real Estate Portfolio as the starting point, we made the following adjustments to create the new Real Assets Portfolio.

Summary of the changes

Decrease the allocation to Global Real Estate as an asset class from 50% to 45% 

• Inclusion of Nordea 1 - Global Real Estate Fund with a 20% allocation for manager diversification reasons. 
• Weightage to Janus Henderson Horizon Global Property Equities Fund is optimised to 25%.
• Removal of all Asian real estate funds and the Blackrock Global Real Assets Securities Fund.

Increase allocation to Infrastructure to 40% by adding two new funds. 

• M&G (Lux) Global  Infrastructure Fund for its targeted and pure-play approach to the Infrastructure sector 
• KBI Global Sustainable Infrastructure Fund for its approach to forward-looking and underallocated infrastructure companies.

‍Add natural resources equities allocation exposure of 10% expressed via a Ninety One fund

• The Ninety One Natural Resources Fund offers broad exposure to natural resource companies with a degree of inflation protection and energy transition themes.

Include commodities fund with a 5% allocation to a PIMCO fund 

• PIMCO GIS Commodity Real Return Fund seeks to provide effective, liquid and straightforward direct exposure to commodities. 
• This also represents an extra return potential from an actively managed portfolio of global inflation-linked bonds collateral.

Comparing the old and new Portfolios: Allocation breakdown

Geographically, the new Real Assets Portfolio has a higher allocation to the US and Europe while reducing exposure to Asia, more specifically Australia and developed Asia.

Comparing the sector allocation of the two portfolios, real estate and Infrastructure (through utilities and industrial sectors) continue to form the core allocations, with a combined weight of 75%. 

In addition, the fund also provides new exposure to energy and basic materials through the inclusion of natural resources equities. 

Lastly, the key aspect of the Portfolio is its ability to serve as a satellite allocation, one that is complementary to a core allocation like the Endowus Flagship Portfolios. Each of the underlying funds does not have major overlaps with the global equity proxy and among themselves as well. 

The Real Assets Portfolio also consists of more than 200 holdings, with the 10 top holdings comprising less than 20% of the Portfolio. 

Expected results of the optimisation

While hindsight often leads to better-optimised returns compared to the previous iteration, we believe that the underlying managers' ability and the inclusion of natural resources equities and commodities will contribute to the improved performance. 

The quality of a Fund’s process and management team is of importance, for which we look beyond just performance. We maintain conviction in the ability of these funds to outperform over the longer term, as driven by stock selection. 

Higher sensitivity to inflation

The Real Assets Portfolio has performed better during periods of rising and unexpected inflation due to allocation to commodities and natural resources equities. 

Lower maximum drawdown 

As a result of diversification across asset classes: The inclusion of more categories has led to a lower maximum drawdown. For example, in 2022 when a surge in inflation led to the rerating of global real estate prices, the Real Assets Portfolio was protected by having some allocation to natural resources equities and commodities. 

Recommended portfolio changes for other Endowus Portfolios (2024)

• Endowus Flagship CPF Portfolios: Introducing Dimensional
• Endowus ESG Portfolios: Invest consciously with purpose
• Endowus Megatrends Portfolio: The power of the future

Frequently asked questions

1. How do I accept the Recommended Portfolio Change?

You can view and opt in for the changes via any of the 3 options below:

• Click ‘Login’ from the Recommended Portfolio Change email you would have received.
• Click the notification bell on your Dashboard, then select ‘Review recommendations’.
  

• Select the relevant goal’s page under the My Goals section, then select “View recommended changes” under ‘Manage goal’. You can find a video tutorial on how to do so here. 

The entire process will take 5 to 10 business days to complete. A full redemption cannot be performed until the rebalancing process is completed.

Read: FAQ for Recommended Portfolio Change. 

2. Why does Endowus recommend portfolio changes?

Our Investment Committee is constantly evaluating the funds in our advised portfolios and the wider investment universe. If we feel that other funds can better express our asset allocation views at a lower cost or improve the risk-return profile of the portfolio, we will recommend a portfolio change to our clients.

Watch: How do Endowus recommend portfolio changes work?

3. What is the Endowus Core-Satellite approach?

Most investors should begin with an allocation to the Endowus Core strategies. All core portfolios must be globally diversified, have a strategic passive asset allocation (SPAA), and be low-cost. It is advisable that all investors begin with a meaningful asset allocation to core portfolios for their essential financial goals (with Cash, CPF, and SRS) before extending their investment holdings to Satellite positions.

Read more: How to approach core and satellite investing with Endowus

4. Why is the recommended portfolio change suitable for me?

Monitoring the investments in your portfolio and trying to optimise for improvements can be a time-consuming and complicated affair. This is where working with a trusted financial adviser like Endowus can help you improve the way you invest. We represent non-institutional investors to negotiate for more efficient share classes with established fund management companies. 

Have more questions? Schedule a 1-on-1 appointment with our MAS-licensed financial advisors at any time!

Enjoy lower fees, and stronger long-term gains with Endowus

The Endowus Investment Office is constantly monitoring your advised portfolios and searching for new options that will improve these portfolios. Opt in for the recommended portfolio change today to upgrade your Portfolio.