Endowus announced today that it is launching its Cash Smart suite of cash management products, with two options for investors: Core (projected yields between 1.1% to 1.3%) and Enhanced (projected yields between 1.9% to 2.2%).
Update (21/8): The rates are dynamic and are on a projected basis. You can view the latest rates here.
The features of Cash Smart would be similar to most cash management platforms out there – there isn’t a fixed lock up period, so you can withdraw and transfer your money at any time and interest is accrued daily and automatically reinvested at the fund level and reflected in the Investment Value shown in your account.
Endowus is rebating 100% of sales and trailer fees for both options, and there are no transaction fees for switching, buying or selling into these funds.
The only fees charged are 0.05% per year by Endowus, and between 0.18% to 0.30% in fund management fees charged by the fund manager. The yields that you see are net of all these fees.
Endowus is a digital financial advisor, so they act as your fiduciary and partner with fund managers around the world to find the best portfolio for your own goals and risk appetite. In the case of cash smart, they are partnering with UOB Asset Management, Fullerton Fund Management (a subsidiary of Temasek) and Lion Global who will be the ones managing the portfolio.
I think what I like about their offering is the option to choose between the two cash management portfolios, depending on your goals and risk appetite. Regardless of which option you eventually choose, both offerings will give you a diversified portfolio with a mix of short-duration bonds and money market instruments.
I also think it is a great time to be offering slightly higher yielding cash management products in a low interest rate environment where interest rates on bank deposits are now really miserable. I wrote about the options available in a previous article.
What goes into these cash management funds?
I think it’s also a good idea to get a rough idea where your money is going and how the higher yields come about, because they are not a bank deposit and there’s no capital guarantee on them.
Your money goes into relatively safe funds that contains investments into high quality short-term bonds and government bills (e.g. 3-month treasury bills), institutional and bank fixed deposits, bonds to statutory boards and government-linked entities, among other things.
Because of their short tenure (denoted in months, rather than years) and low default risk, there are minimal price fluctuations of the fund while the investor receives interest on the bond.
However, I want to stress that these are not 100% risk-free. Although the risk is relatively low, there are still risks associated with these funds – there might be price volatility, the yields could change at any time (and even go lower than projected), and there might be still risks of default by any one of the borrowers.
To get started on Endowus, there is a minimum balance of $10,000 required, with a minimum of $100 per transaction. There is no minimum balance that must be maintained in Cash Smart.
New clients who use this exclusive link and fund their cash management account with at least S$10,000 will earn S$100 worth of Lion-Global Investors All Seasons Fund (Growth) credited into their account by 30 April 2021.
Endowus is also offering a limited time minimum investment amount of S$888 (usual: S$10,000) until end of March.