Note: As of Nov'21, Endowus Cash Smart Core is now referred to as Endowus Cash Smart Secure. There is no change in the underlying investment offerings.
Interest rates are falling rapidly around the world. Bank deposit rates are also getting cut and yields are falling. Central banks globally are increasing liquidity and cutting rates to support the post-pandemic economy devastated by COVID-19. Investors are now struggling to find yields and searching for financial products in cash-like instruments, as interest rates and deposit rates hit unprecedented new lows.
Are there safe, higher yielding products out there for regular people on the street to put their money into before they make that investment decision or to keep their rainy day funds? What are the risks associated with these products and how do they differ from bank deposits and similar products?
In this session, Samuel Rhee, CIO and Chairman of Endowus, and Gregory Van, CEO of Endowus, share about some of the key strategies behind making your cash work harder for you across short and long term periods. This includes various cash management solutions including the popular money market funds.
0:00 Introduction to Endowus
0:30 Introducing Endowus Cash Smart
11:01 Cash Smart Core & Cash Smart Enhanced
12:21 Low Market Interest Rates Environment
15:56 Use of Money Market Funds for liquidity management
19:00 Endowus Cash Smart Yield Projection
25:29 How does Cash Smart get higher returns than bank deposits?
30:39 Projected Yield and historical return of Fullerton SGD Cash Fund, LionGlobal Enhanced Liquidity Fund and UOB United SGD Fund
37:21 Projected Yield of Endowus Cash Smart Core and Enhanced
43:00 Core and Enhanced performance during worst period in March
54:16 Historical performance of Endowus Cash Smart versus competitors
1:03:20 Demo on how to create a Cash Smart portfolio
Excerpts from the Presentation
What are the differences in risks between Bank Deposits and Endowus Cash Smart (25:29)?
If you make a deposit to a bank, the bank will likely lend it out and then pay you an interest on it, while taking the difference. The banks may lend that money out in the form of unsecured lending, housing loans etc.
If a global financial crisis-like situation happens, your bank deposit will only be insured up to $75,000 by the Singapore Deposit Insurance Corporation (SDIC).
While the SDIC has never been activated, it is worthwhile to note that during the Global Financial Crisis banks did go bankrupt and people lost their deposits. During times like the Great Depression, there were bank runs where everyone was running to the bank to pull out their money out.
Endowus Cash Smart is a portfolio of funds with institutional fixed deposits, short duration and high quality government bonds, and short duration and high-quality corporate debt. What you own is a portfolio of fixed income instruments with short duration high quality risk, that is spread out across many counter-parties.
In our product, the money is invested through Fullerton, UOB Asset Management and LionGlobal, based on the investment parameters of their funds.
It can be seen as a much more efficient way to park your cash and in some ways lower risk because rather than exposing yourself to one entity borrowing money, you are spreading your counterparty risk widely.
How did Endowus Cash Smart Underlying Funds perform during high volatility (37:28)?
As shown in the table below, the Fullerton SGD Cash Fund, which is made up of institutional fixed deposits, has followed the interest rate movement during the COVID-19 crisis dropping from 1.5% to 0.7% projected yield.
The LionGlobal Enhanced Liquidity Fund, has dipped during the crisis, but went back up in April and May.
The United SGD Fund, which has more flexibility and can take on more risk, has taken the market dislocations in pricing to take up higher yielding bonds during the crisis and acquire bonds that have dropped in price temporarily.
This is why we provide a range in yield rather than a fixed number to reflect the variability in yield.
The table below shows the worst case scenario for from 2019 to 2020.
There was a single day loss of 0.047% for the Endowus Cash Smart Core portfolio due to liquidity constraints for the LionGlobal Enhanced Liquidity Fund as the fund size was small.
In March 2020, there was also a single day loss of 0.02% due to liquidity crunch from COVID-19. These losses are made up within a day or two.
The Enhanced Portfolio, which is made up of 50% of United SGD Fund instead of Fullerton SGD Cash Fund, has seen a loss of 0.92% in the worst period during the CoVID-19 crisis.
While this drop was recovered within 50 days, clients interested in the Enhanced Portfolio should take that into consideration if they were to choose the Enhanced Portfolio over the Core portfolio.
Both the LionGlobal Enhanced Liquidity Fund and the United SGD Fund have a weighted average credit quality of A. They have both higher quality and lower quality bond holdings in their portfolio, but a track record of managing the risk very well.
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.
This advertisement has not been reviewed by the Monetary Authority of Singapore.