Flagship CPF Portfolios made better with lowest-cost Amundi passive index funds
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Flagship CPF Portfolios made better with lowest-cost Amundi passive index funds

Updated
21
Aug 2023
published
26
Apr 2023
Endowus Flagship CPF Portfolios now made better with lowest-cost Amundi passive index funds
  • By leveraging the expertise of global best-in-class fund managers, Endowus provides investors with low-cost and broad globally diversified exposure to equities and fixed income markets through our Flagship Portfolios.
  • The recommended portfolio change (RPC) — to the equity component of the Flagship CPF Portfolios — improves the tracking of global benchmarks, provides a more balanced, diversified exposure to markets, and lowers the cost of investments. 
  • This is achieved by introducing, exclusive to Endowus, new low-cost passive index funds from Amundi. Endowus and Amundi have worked in partnership to bring these lowest-cost passive index funds into the CPF Investment Scheme, so that all CPF members can enjoy the benefits of low-cost passive investing.
  • Watch our webinar to learn more about the recommended portfolio change. For details on the proposed changes to the Flagship Cash/SRS Portfolios, refer to this article.
  • To get started with Endowus, click here.

In our latest recommended portfolio change (RPC), Endowus is recommending to clients changes to only the equities component of the Flagship CPF Portfolios. 

These changes, if taken up, will lower the cost of investments for clients and provide a closer tracking of the respective benchmarks.

The latest RPC is part of Endowus’ commitment to source for funds that will optimise your portfolios. Clients can choose to accept or reject the recommended changes.

To learn about the RPC for Flagship Cash/SRS Portfolios, click here.

Lower cost and more balance for your Flagship CPF Portfolios

The table below summarises the recommended portfolio changes, for the Flagship CPF 100% Equities Portfolio. There are no recommended changes to the fixed income portion of the portfolios at this time.

Flagship CPF 100% Equities Portfolio 

Flagship CPF 100% Equities Portfolio 

For the equity portion of the Flagship CPF Portfolio, we are proposing these three changes:

  • We are replacing the passive US equity and global equity exposure via LionGlobal Infinity U.S. 500 Stock Index Fund and LionGlobal Infinity Global Stock Index Fund, with the Amundi Prime USA Fund and the Amundi Index MSCI World Fund, respectively;
  • We are reducing dedicated exposure to the US and increasing exposure to diversified global equities; and
  • We are reducing exposure to dividend paying and more value-oriented companies in Asia.

These changes to the equity sleeve of the Flagship CPF Portfolio series will result in a reduction of the underweight to developed Europe, and a reduction of the overweight to Asia, in general. The portfolio will maintain a slight overweight to emerging market equities, of around 5 percentage points.

Geographical allocation comparison (%)

Market exposure Current 100% Equity Portfolio New 100% Equity Portfolio MSCI ACWI
Developed 83.5 86.1 92.0
Emerging 16.5 13.9 8.0
Latin America 1.6 1.7 1.0
Developed Asia 10.2 8.7 4.0
Developed Europe 5.3 6.8 12.7
Emerging Europe 0.4 0.4 0.2
US 60.1 61.0 59.9
Canada 1.1 1.6 3.2
UK 2.1 2.5 4.1
Japan 3.1 3.5 5.6
Australasia 1.5 1.5 2.1
Emerging Asia 13.5 10.9 5.9
Others 1.3 1.3 1.4

Source: Endowus Research, Morningstar Direct, fund managers. Note: Using Morningstar’s classification. Data is as of the most recent available portfolio in Morningstar Direct.

In terms of sector allocations, the new portfolio differs marginally from the current portfolio. The sector allocations stay close to that of the MSCI All Country World Index (ACWI), with the largest deviation at about 3.4%. Relative to the index, the new portfolio has overweight allocations to the Technology and Financial services sectors and underweights in the Energy and Industrials sectors.

Sectoral allocation comparison (%)

Sector exposure Current 100% Equity Portfolio New 100% Equity Portfolio MSCI ACWI
Basic materials 3.4 3.5 4.8
Consumer cyclical 10.2 11.3 10.1
Financial services 19.7 18.5 16.4
Real estate 2.7 2.7 2.7
Communication services 6.9 7.4 7.0
Energy 4.0 3.9 5.6
Industrials 8.4 8.1 10.2
Technology 21.3 22.0 18.6
Consumer defensive 8.0 7.6 8.0
Healthcare 12.8 12.5 13.5
Utilities 2.6 2.6 3.1

Source: Endowus Research, Morningstar Direct, fund managers. Note: Using Morningstar’s sector definition and classification. Data is as of the most recent available portfolio in Morningstar Direct.

Comparing the two portfolios and the index across the different market cap segments, we see that the updated portfolio would have a reduction in the overweight to giant market-cap stocks versus the index. Compared to the index, the portfolio also has an underweight to large market-cap stocks.

Market cap allocation comparison (%)

Market cap exposure Current 100% Equity Portfolio New 100% Equity Portfolio MSCI ACWI
Giant 52.3 50.9 48.0
Large 32.2 33.0 36.1
Mid 14.6 15.2 15.7
Small 0.9 0.9 0.2
Micro 0.0 0.0 0.0

Source: Endowus Research, fund managers

We expect these changes to not only make the Flagship Equity Portfolio more cost efficient from a TER perspective, but also improve longer-term returns.

Performance

As the table above shows, the performance for the new Flagship CPF 100% Equity Portfolio is much better compared to the current portfolio in the trailing 3-year and 5-year periods. However, its volatility is slightly higher than the current portfolio and the benchmark MSCI ACWI.

Our philosophy to better investing

At Endowus, we believe in a long-term approach to investing. We use our Strategic and Passive Asset Allocation (SPAA) framework to guide our recommended portfolio changes. Rather than trying to beat the market by making tactical shifts, we focus on enhancing our advised portfolios. For more on our SPAA framework, please refer to the Appendix.

The Endowus CPF Flagship Portfolios' goal is to provide low-cost, globally diversified exposure to the equity and fixed-income markets, with the allocations weighted differently to suit different investors' risk tolerance levels. 

Our Flagship Portfolios also benefit from funds using a variety of investment approaches, such as passive, and active; we believe that there is merit to each of these approaches. This enables the portfolio to draw on varying sources of return and investment approaches in different market environments. 

Passive funds provide broadly diversified exposure to the market at a very low cost, systematic funds offer exposure to empirically proven factors with positive expected returns, and active funds exploit inefficient parts of the market to increase excess returns.

Pure passive funds have always been a type of product offering that has been curiously inaccessible for the Singapore retail investors. To address this, we've worked with our partners, BlackRock and Amundi, to launch passive index-tracking funds for retail investors in both equities and fixed income, and to make them available on the Endowus platform. This allows us to lower the cost of our Flagship Portfolios and to improve the balance between investment approaches.

These efforts are in addition to our partnership with Dimensional and PIMCO, through which we bring best-in-class systematic and active funds to Singapore retail investors — and critically, at a fraction of the cost investors usually get at banks.

For more information on the BlackRock and Amundi funds, refer to these in-depth articles: 

Besides the recommended changes to the Flagship CPF Portfolios, Endowus is also proposing changes to both the equities and fixed income components of the Flagship Cash/SRS Portfolios — read about it here.

A guide to accepting the recommended portfolio change

When the RPC is initiated, you can opt for the change via either one of these methods:

  • Click on the Login button directly from the RPC email you would have received.
  • Click on the notification bell on the Dashboard.
  • Alternatively, click on the relevant page under the My Goals section, then select “View the Recommended Portfolio Change” under Goal Settings.

The platform will take you through a comparison of the existing portfolio allocation and the updated portfolio allocation.

Choose to accept or reject the recommendation. If you reject the recommendation but subsequently change your mind, you can always come back to modify your choice via the Goal Settings button.

Once the recommendation is accepted, the portfolio will be rebalanced. The units of the old share class or classes will be sold. Proceeds from the redemption sale will then be used to buy units in the updated share class or classes.

As a value-added service from Endowus, we will also take the opportunity to rebalance your portfolio in a holistic way, back to its target asset allocation. This will be done even if the usual 15% deviation threshold is not breached.

Clients may also accept the RPC by clicking on the Login button from the RPC alert email.

The entire process will take about 5 to 10 business days to complete. You may continue to invest in and partially redeem funds from the portfolio during rebalancing. However, a full redemption cannot be performed until the rebalancing process is completed.

Enjoy lower fees, 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 Flagship Portfolios.

Appendix

Have more questions? The Endowus Investment Office is here to guide you through them.

What is Endowus’ Strategic and Passive Asset Allocation framework?

Endowus takes an evidence-based approach to investing for the highest probability of success, which brings together strategic passive asset allocation and global diversification, expressed through best-in-class funds, at a low cost. We use these building blocks to design portfolios customised to your goals and preferences.

Endowus’ Strategic Passive Asset Allocation (SPAA) framework is:

  • Strategic top-down, meaning the allocation to different asset classes such as equities, fixed income, geography, style or factors, are set based on the goal of the portfolio 
  • Passive in implementation, meaning Endowus does not believe in tactically or actively changing your allocations based on market conditions or economic indicators
  • Curation of portfolio design bottom-up, meaning Endowus carefully selects best-in-class funds to best represent your goal’s SPAA. We access leading global fund managers with the expertise, scale, and a low-cost structure. They have real, proven track records in implementing their strategies with tens and hundreds of billions of assets successfully over time. These strategies can be passive, systematic or active, depending on the asset class they try to represent, and the investment objective.

You may read more about our SPAA framework here.

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 in negotiating for a more efficient share class with established fund management companies. 

Endowus also recognises that every individual is on their own investment journey. It remains a priority that our clients can choose to opt in or out of the recommended changes.

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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 Endowus Singapore 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, 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.

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