Jovi Ho Fri, Jul 08, 2022
Stashaway has raised the projected return rate of its cash management portfolio, Simple, to 1.5% p.a. from 1.3% p.a.
This accompanies a “re-optimised allocation” of underlying funds in favour of LionGlobal SGD Enhanced Liquidity I Acc, which is now 70-30 with the LionGlobal SGD Money Market Fund Class A. The two funds were previously evenly weighted.
In an email to account holders on July 8, Stashaway says the change will be reflected on its platform by July 15.
Stashaway says both funds’ yields have increased “at about the same pace” as the Fed’s rate hikes this year. “With a split of 80-20, we would still have a projected rate of 1.5% p.a., but with additional risk involved. Hence, in terms of the risk-reward ratio, we believe that a 70-30 allocation is a sweet spot for now, and we’ll adjust it accordingly if the difference widens.”
This is Stashaway Simple’s third hike since May. The portfolio started that month with a projected rate of 1.0%. The rate is now above Stashaway Simple’s launch rate of 1.4% in November 2019.
“As you may have seen with our recent updates to Simple’s projected rate, the current rate hike environment has benefited both the underlying funds, LionGlobal SGD Enhanced Liquidity I Acc (LGI ELF) and LionGlobal SGD Money Market Fund Class A (LGI MMF). However, LGI ELF has a higher yield than LGI MMF. So by having more exposure to ELF, you get a better yield for Simple,” writes Stashaway in a July 8 post on its website.
They add: “LGI ELF’s higher yield comes with a longer duration (meaning it’s more sensitive to interest rate changes) and higher credit risk than LGI MMF as LGI ELF has more exposure to corporate bonds.”
The digital wealth manager is now on the lookout for “newer, better-quality bonds”.
Stashaway says its fund manager, Lion Global, is committed to diversifying its holdings and is now sourcing yield from “various other avenues”. “Also, Lion Global has always kept enough cash buffer to ensure that the portfolio is liquid enough to take redemptions without having to sell bonds.”
The move matches competitor Syfe’s hike on June 20. Syfe raised the projected return rate of its cash management portfolio, Cash+, to 1.5% p.a. from 1.2% p.a. previously. Syfe launched Cash+ in January 2021 with projected returns of 1.75% p.a.
Syfe’s Cash+ holds the same underlying funds and allocation as Stashaway Simple.
Meanwhile, fellow competitor Endowus offers three cash management portfolios, with the highest boasting a projected return of 2.5% to 2.9% p.a. after fees.
Cash Smart Ultra, the highest-returning tier among Endowus’ three Cash Smart portfolios, launched with a 1.7% to 2.0% p.a. target in April 2021.
Endowus’ Cash Smart Ultra holds the following allocation: 27.5% in LionGlobal SGD Enhanced Liquidity Fund, 25% in Fullerton Short Term Interest Rate Fund, 25% in LionGlobal Short Duration Fund, 12.5% in Nikko Shenton Income Fund and 10% in PIMCO Low Duration Income Fund.
The return rates of its Cash Smart suite, which also includes Cash Smart Secure (1.1% to 1.3% p.a.) and Cash Smart Enhanced (1.9% to 2.3% p.a.), were updated on May 31.
“The Secure Portfolio continued to provide stable and positive returns as expected despite volatile market conditions. Its ultra short duration means the portfolio is relatively more liquid than other higher duration portfolios. It is also less sensitive to changes in interest rates,” says Endowus in a June 17 note.
“Both the Enhanced and Ultra Portfolios saw a rebound after the lows in late-April and mid-May respectively with decent positive returns for the month,” they add.
“The rising rate environment provides an opportunity for the underlying funds to reinvest and allocate the coupon payments and cash from maturing bonds to higher yielding bonds,” says Endowus.