How do we calculate current payout target, estimated capital appreciation and estimated total return of the Endowus Income portfolios?

Current payout target p.a.
Current payout target is an estimated amount of money you will receive on a regular basis per annum from your Passive Income portfolio. This estimated payout is calculated based on the target fixed and variable coupons/dividends of the underlying funds in the portfolio.

For example, if you invest S$100,000 and the portfolio’s current payout target p.a. range is 4.0% to 5.0% p.a., you’ll receive an estimated S$4,000 to S$5,000 p.a. paid out throughout the year.

Estimated capital appreciation p.a.

Estimated capital appreciation is the range of outcomes that the Income portfolio’s investment value can potentially grow on average per year, excluding payouts. We use 10 year rolling historical data to calculate estimates of the top 5% and bottom 5% probable outcomes.

For example, you invest S$100,000 and the portfolio’s estimated capital appreciation p.a. range is -1.5% to 3.0%. After 10 years, your portfolio’s investment value can range between an estimated S$85,973 (-1.5% p.a.) and S$134,392 (+3.0% p.a.), with a median outcome of $110,182.

Estimated total return p.a.
Estimated total return is the current payout target plus estimated capital appreciation, and is the best representation of your total gains by investing in the Income portfolio.

For example, if you invest S$100,000 and the portfolio’s current payout target is 4.0% to 5.0% p.a. with an estimated capital appreciation of -1.5% to 3.0% p.a., your expected total return p.a. would be +2.5% (4.0% paid out plus -1.5% in capital appreciation) to +8.0% (5.0% paid out plus 3.0% in capital appreciation). This equates to between S$2,500 or +2.5% p.a. in a poor outcome and S$8,000 or +8.0% p.a. in a great outcome over the mid to long term.

Note: All figures have already taken fund-level fees into account, which are embedded in the fund’s Net Asset Value (NAV) and charged by the fund managers.

Disclaimer:
Current payout target, estimated capital appreciation and estimated total return are not guaranteed and are estimates only. Your principal invested amount may or may not be returned in full. These targets and estimates are subject to market movements and fund manager’s decisions that are outside the control of Endowus and therefore may not be realised in the future.

Max Drawdown and Historical Loss

While our Income Portfolios are created with the best-in-class fund management companies in the income investing space, there is still risk involved and investments are not capital guaranteed. 

Understanding the historical maximum loss of the respective portfolio can be a good way to assess whether the portfolio is suitable for your risk appetite. Historical maximum loss (“drawdown”) is the fall from the peak (the highest point) to trough (the lowest point) in investment value, based on historical performance. 

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Investors may use the historical maximum drawdown as an indication of the maximum loss they may have experienced by investing in the specific portfolio over a period of time. 

Please note that the drawdown figure is based on historical performance, which may not be indicative of future performance. There is always the risk that the latest maximum drawdown will be overtaken by a new maximum drawdown in the future. Investors should therefore view the historical maximum drawdown as a reference point and not a guarantee of future maximum loss.