Fund Rationale: Fullerton Short Term Interest Rate Fund

Fullerton Short Term Interest Rate Fund
SGD Retail Class C Accumulation Shares (ISIN: SG9999006225)

Fund Manager Page

Introductory information
The Fullerton Short Term Interest Rate Fund (the “Fund”) aims to achieve medium-term capital appreciation by investing in broadly diversified holdings in investment grade fixed income securities and money market instruments of up to 5 year maturity with no specific industry or sectoral emphasis. The Fund is benchmarked against the 3-month SIBID.

The inception date of the oldest share class of the Fund is 9 September 2004, while the SGD Class C Accumulation shares were incepted on 25 September 2009. As of July 2020, the Fund managed a total asset of SGD 887.8m.

The investment strategy of the Fund is to maximise returns via investment in Singapore Dollar and foreign currency denominated fixed income securities, of up to 5 years tenure, and money market instruments. The foreign currency denominated fixed income securities will be fully hedged back to the Singapore Dollar except for a 1% frictional currency limit (to account for possible deviations from a 100% hedge), and will have investment-grade credit ratings of at least BBB- by Standard and Poor's or Baa3 by Moody's (or their respective equivalents). The investments are to be made after analysing historic and expected interest rate movements. The Fund may also invest in FDIs for the purposes of hedging and/or efficient portfolio management (namely, managing risks) without leveraging the portfolio.

As of July 2020, the Fund has 153 holdings, and has 42.5% allocation to Singapore, 36.4% allocation to China, 6.8% in Hong Kong, the rest in India, Malaysia, and Cash and cash equivalents. It has an average credit rating of BBB and an average duration of 1.8 years. The average coupon rate is 3.3% and yield to worst of 2.7%.

Background information and cost
The Fund has an underlying fund management fee of 50bps per annum (0.50% p.a.) and total expense ratio (“TER”) of 53bps per annum (0.53% p.a.). Endowus have arranged for Fullerton to rebate the trailer fees which Endowus will refund 100% back to the client to achieve a lower net management fee of 25bps (0.25% p.a.) and net TER of 28bps (0.28% p.a.). Endowus do not charge a preliminary sales charge or any other  fees, other than the all-in advice fee.

Fullerton Fund Management Company are Asia-based investment specialists, with capabilities that span equities, fixed income, multi-asset, treasury management, and alternatives, including private equity.  Prior to their establishment, Fullerton’s investment team operated as the internal fund management division within Temasek Holdings (“Temasek”), a global investment company headquartered in Singapore. Fullerton Fund Management were incorporated in Singapore in 2003 and are currently a subsidiary of Temasek. NTUC Income, a leading Singapore insurer, became their minority shareholder in 2018.

Selection criteria for Endowus
Endowus have selected the Fullerton Short Term Interest Rate Fund for its ability to generate return with relatively safe characteristics. The Fund keeps a low duration risk and only invests in investment grade credit, the Fund managers have some flexibility to increase or decrease the duration and adjust allocation between Asian USD credit and SGD credit where they see suitable opportunities. As of 2020 August,  the Fund returned 3.03% annualised since inception in 2009 with 1.19% annual volatility. In March 2020, the Fund experienced the largest drawdown since its inception with a peak to trough magnitude of -1.9% when the credit market sold off; it was able to recover in three months and capture the rebound in the credit market. It is an Luxembourg domiciled UCITS fund which is more tax efficient and it is denominated in Singapore dollars to make it an FX efficient portfolio for Singapore based investors matching your assets with your future liabilities and thereby removing unnecessary FX risk and cost.

Updated by Endowus: 25 Sept 2020

** Disclaimer
Past performance should not be taken as an indication or guarantee of future performance and no representation or warranty, express or implied, is made regarding future performance. Any opinions expressed reflect a judgment at the original date of publication by us and are subject to change without notice.

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