The banks did it again. In just a few months, several popular savings accounts had their interest rates cut multiple times. For example, Standard Chartered’s Jumpstart account, an account which I have been using since late 2019 had its interest rate cut twice from 2% to 0.4% in months. OCBC 360, OCBC’s flagship savings account had its interest rate cut for the fourth time since May last year.
Many Robo-Advisors saw this opportunity and introduced their own cash management solutions – with Stashaway among the first. Lately, Syfe joins its other Robo-Advisors competitors to introduce its own cash management portfolio called Syfe Cash+. In this post, we will discuss more about the product and how it compares to other alternative savings products. Also, I will be sharing my thoughts on how I will be allocating my spare cash with the introduction of Syfe Cash+.
Features about Syfe Cash+
- Projected returns of 1.5%, highest among cash management solutions products for now.
- Provides daily accrual of returns – you will be able to see your savings grow every day.
- No lock up periods, you can withdraw anytime and get to keep all returns accumulated during the period you invest in Cash+. Withdrawal takes about 2-3 working days to process.
- No Syfe management fees.
Syfe uses funds from LionGlobal, the largest asset managers in Southeast Asia, owned by OCBC to construct its Syfe Cash+ portfolio. It allocates 30% of its portfolio into LionGlobal SGD Money Market Fund, 35% into LionGlobal SGD Enhanced Liquidity Fund and the remaining 35% into LionGlobal Short Duration Bond Fund.
LionGlobal SGD Money Market Fund (30%)
LionGlobal SGD Money Market Fund invests in high quality short-term money market instruments and debt securities. Some of the assets owned by this fund include government and corporate bonds, commercial bills and deposits with financial institutions. The fund’s weighted Yield to Maturity and weighted duration stand at 0.99 % (from 1.18% 3 months ago) and 0.38 years respectively. The weighted credit rating of the fund is A where 100% of its assets are Investment Grade rating (BBB- or Baa3 or better). Among the top 10 holdings, the fund holds medium term notes from Mapletree Treasury, Ascendas Reit, MAS Bill and Singapore Airlines. These 3 local MTNs constitute about 11.9% of the fund.
LionGlobal SGD Enhanced Liquidity Fund (35%)
LionGlobal SGD Enhanced Liquidity Fund invests in a broadly diversified portfolio of high quality debt instruments diversified across varying issuers and tenures while maintaining a weighted average portfolio credit rating of A- and a weighted average duration of around 12 months. The fund’s weighted Yield to Maturity and weighted duration stand at 1.60% (from 1.94% 3 months ago) and 0.87 years respectively. The fund’s weighted credit rating is A. Among the top 10 holdings, the fund holds Capitaland 2.95% convertible bond maturing next year June and a couple of MAS Bill maturing this year. These notable mentions constitute 18.4% of the fund.
LionGlobal Short Duration Bond Fund (35%)
LionGlobal Short Duration Bond Fund invests in a portfolio of Singapore and international bonds, high quality interest rate securities and other related securities. The fund generally invests in bonds with investment grade quality, though the fund might be exposed to sub-investment grade securities. The fund’s weighted Yield to Maturity and weighted duration stand at 1.95% (from 2.41% 3 months ago) and 2.15 years respectively. The fund’s weighted credit rating is BBB (investment grade). Among the top 10 holdings, it holds bonds and perpetual from Capitaland, Singapore Tech Telemedia, Ascendas Reit and Keppel Land. These notable mentions constitute 6.1% of the fund.
Why did the projected returns get adjusted?
Low interest rates, especially for the short term period, will be here to stay for long. According to the Federal Reserve, it will keep rates unchanged at 0%-0.25% until at least 2023. We saw news that the 10Y treasury yield has been climbing for the past month and we also heard news that the yield curve between 2 and 10 year yields at its widest since 2017. However, long term yield is not controlled by The Federal Reserve but instead by market forces based on inflation and economy expectation.
As Syfe Cash+ portfolio invests in bond funds that have weighted duration from as short as 0.37 years to as long as 2 years, the likelihood of bond issuers issuing new bonds at lower bond yield is inevitable. Weighted Yield to Maturity for the bond funds has fallen by about 16% to 19% on a comparative basis in just a span of 3 months since writing this article. It is only sustainable for Syfe to adjust the projected rate of return by 0.25% from 1.75% to 1.5%, to reflect the interest rate environment.
Comparing with Stashaway Simple and Endowus Cash Smart
I will be doing a comparison with Stashaway Simple and Endowus Cash Smart since I covered the two products in my Best Savings product article. The article will be updated every month or so, allowing readers to make an informed decision to capture the best yield available in the market.
Comparing solely on the funds used, Stashaway Simple uses LionGlobal SGD Money Market Fund and LionGlobal SGD Enhanced Liquidity Fund with equal weightage (i.e 50% each). Even though the funds used by Stashaway SImple are the same as Syfe Cash+, the latter yields higher returns than the former by 0.61%. This is because Syfe Cash+ enhances the returns with LionGlobal Short Duration Bond Fund which yields 1.95% at maturity.
On the other hand, the only fund that used by both Endowus Cash Smart and Syfe Cash+ is LionGlobal SGD Enhanced Liquidity Fund. Endowus Cash Smart uses Fullerton SGD Cash Fund and UOB United SGD Fund.
Fullerton SGD Cash Fund provides investors with liquidity and return that is comparable to that of the Singpaore Dollar Banks Savings Deposits Rate. This fund’s objective is similar to LionGlobal SGD Money Market Fund. The fund will hold assets primarily in Singapore Dollar deposits with eligible financial institutions with varying terms of maturity of not more than a year. The fund may place deposits for at most 2 years, subject to a maximum of 10% of the Fund’s NAV. As of February 2021, about 80% of its funds are placed in Qatar National Bank Singapore, National Commercial Bank Singapore and Bank of Tokyo-Mitsubishi UFJ, with 46.7% of its fund maturing in less than a month.
UOB United SGD Fund invests substantially all its assets in the money market and short term interest bearing debt instruments and bank deposits with the objective of achieving a yield enhancement over Singapore dollar deposits. The fund’s weighted average maturity and weighted average Yield to Maturity stand at 1.29 years and 1.77%. It is a highly diversified bond fund with 127 issues with 40% of its bonds issued in Singapore.
Although Syfe adjusted its projected returns for Cash+ to 1.5%, it still has the highest projected return compared to its competitors offering cash management solutions. Syfe’s competitors such as Stashway Simple and Endowus Cash Smart offer 1.2% p.a and 0.8%-0.9% p.a or 1.2% to 1.4%.
Cash+ was constructed on a basis of finding the best risk to reward ratio in the form of credit risk and rate of returns. Fret not, chances of permanent capital loss in investing in cash management solutions are very low as the underlying assets are high quality government and corporate bonds that are of investment grade.
Comparing with Insurance Savings Plan
In my opinion, Syfe Cash+ is the best cash management solution offered in the market so far as it does not have a minimum deposit required and has the highest project returns but how does it stack up with insurance savings plans?
I will be doing a comparison with Singtel Dash PET and Singlife since I covered these in my Best Savings product article.
Let’s talk about the differences. I feel the main difference between cash management solutions and insurance savings plans is liquidity (i.e the number of days required for you to receive the payout upon selling/withdrawal). Usually, it takes about 2-4 working days to receive payout upon withdrawing from cash management solutions while it is almost instant for insurance savings plans. For example, recently I withdrew money from GIGANTIQ and I received the fund in my bank account instantly, though I paid $0.50 for withdrawal. This wouldn’t be the case for cash management solutions, you can withdraw anytime and get to keep all returns accumulated during the period you invest in cash management solutions,
Next, another difference between both products will be that cash management solutions do not have guaranteed returns unlike insurance savings plans (besides Singlife). The fund’s yield to maturity used by cash management solutions will fluctuate more often if its maturity is short. In this low interest rate environment, issuers are able to issue lower interest rate bonds that can reduce the current fund’s weighted yield to maturity. This can be seen in Stashaway Simple where its projected returns reduced from 1.9% when it was first introduced to 1.2% recently. Endowus Cash Smart also suffers the same fate as Stashway Simple where one can get returns from up to 1.9% to now up to 1.4%.
On the other hand, insurance savings plans such as Singtel Dash PET and GIGANTIQ are bound by the contract agreement to guarantee the rate of returns for a year. Many, including myself, are still unclear of Singlife stance in non-guaranteed returns. My view is that Singlife can reduce the rate of returns without our consent. It does not mean that putting in money in Singlife will result in losing money.
On the topic of guaranteed returns, investors are exposed to market risk when putting money in cash management solutions as opposed to insurance savings plans. Cash+ and Endowus Cash Smart encountered a maximum drawdown of 0.73% and 0.92% respectively. This shows that even though cash management solutions are meant to be a safer investment instrument, it is likely that investors can lose money investing in such products. Stashaway classifies its risk index for Stashaway Simple as 1.7%, meaning that one has a 99% chance of not losing more than 1.7% of your funds. With that, insurance savings plans are seen as a safer choice with better liquidity and guaranteed returns.
How will I stash my money now?
Singlife continues to be undefeated even with the introduction of Syfe Cash+, I will continue to max out my money with Singlife first before moving on to GIGANTIQ or Singtel Dash PET.
Even though Standard Chartered’s Jumpstart has cut its interest rate for the second time, I am still keeping some money in the account as this is where I keep my capital for investments. This is because I still require the liquidity of what a bank can offer which other alternative products (even for Singlife) cannot replicate yet. If all my capital for investment has been fully deployed, then I will consider GIGANTIQ or Singtel’s Dash PET.
I will prioritise cash management solutions last as the time taken to receive the payout is longer than the ones offered by insurance savings plans. If you were to let me choose between Cash Management Solutions, I will definitely put some money in Syfe Cash+. The money you should put in cash management solutions should not be used for everyday’s life as its purpose is not to replace your ordinary bank account. Therefore, I recommend putting money you are not going to use for the short term in it and that you will not need to use it urgently when needed (in view of the time taken to receive the payout).
The content has been updated in Best Savings Product article.
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