Endowus Fund Smart, what is it?

Endowus Fund Smart creation
How it looks like

Very recently, Endowus, currently the only roboadvisor that lets you invest your CPF, introduced a new platform called Fund Smart. Unlike Cash Smart, this tool aims to let you choose your own funds to customise your portfolio. It is basically like choosing their curated unit trusts and creating a portfolio that you want or just changing the allocation at a non-advised basis.

But why? Isn’t the point of a roboadvisor to set it and forget it?

That was my initial thought too. But I withheld from writing my thoughts and listened to some parts of their webinar on Friday. This is their rationale behind it.

  1. They especially “curate” the funds

I like the idea of this. People usually turn to roboadvisors when they are doubtful of their ability. They want someone else to do it for them. This applies to both beginners starting out as well as High Net Worth Individuals (HNWI). This allows a bit more customizability to tweak your allocation to your liking.

  1. The funds are provided at a lower cost, with their mantra of a 100% trailer fee rebate
Endowus fee comparison
Their fee comparison

For people who are more confident, they can also use Endowus’ platforms to purchase unit trusts at lower costs. Their trailer fee rebate is something I really stand by. I think it is hard to find any other brokerage offering the same fund for a lower cost. Trailer fees are a pretty big part in unit trusts.

  1. It can still utilise Endowus’ fund research tools to rebalance your portfolio

I am not sure how this will be superior to fund research tools found publicly on the internet. Also, I am not too sure how their rebalancing will affect your returns or risks, so I have no comment on that.

Generally, I like the idea of it but let’s take a deeper dive into some of the stuff you can do with Endowus Fund Smart.

Improve Endowus Cash Smart yield

Currently, Endowus’ Cash Management solution, Cash Smart, offers two different tiers. One that offers up to 1.1% and the other offers up to 2%.

Now with Fund Smart, you can inject your own funds to create a custom Cash Management solution that aims to improve yield. I cannot exactly remember what fund the Endowus team recommended in their webinar.

As we want to improve yield, I will look at how we can change Cash Smart Enhanced. Currently, it has these 2 funds.

50% United SGD Fund (Short Duration Bond Fund)

  • Weighted average yield to maturity is 3.5%
  • 3 year annualised standard deviation of 1.58%
  • 34% exposure to Singapore, followed by 26% exposure to China

50% LionGlobal SGD Enhanced Liquidity Fund (Money Market Fund)

  • Weighted yield to maturity of 1.99%
  • 50.3% in Singapore, 35.1% in China

But here are some funds which I think can suit this purpose – more than 2% but low volatility.

Fullerton Asian Short Duration Bonds (Short Duration Bond Fund)

  • 3% annualized return 
  • Volatility of around 3%
  • 44.7% in China, 9.4% in Hong Kong

United SGD Plus Fund (Bond Fund)

  • Annualized return of 3.35%
  • Volatility of 4.6%
  • 45.5% in Singapore, 33.9% in China

Do take note that the Bond Fund is “riskier” (higher volatility, which may not be as suitable as a cash management solution) than other funds. I think the LionGlobal SGD Enhanced Liquidity Fund is one of the better Money Market Funds offered already.

I laid out 3 possible allocations. Do not take this as investment advice. It is merely my take.

Allocation 1Allocation 2Allocation 3
50% United SGD Fund (Short Duration Bond Fund)50% LionGlobal SGD Enhanced Liquidity Fund (Money Market Fund)70% United SGD Fund (Short Duration Bond Fund)
25% LionGlobal SGD Enhanced Liquidity Fund (Money Market Fund)25% United SGD Plus Fund (Bond Fund)30% LionGlobal SGD Enhanced Liquidity Fund (Money Market Fund)
25% Fullerton Asian Short Duration Bonds (Short Duration Bond Fund)25%United SGD Fund (Short Duration Bond Fund)
Average yield = 3% (excluding fees)Average yield = 2.7% (excluding fees)Average yield = 3% (excluding fees)
My take on improving the yield of Endowus Cash Smart

Change allocations of Endowus model portfolio allocation

One more thing we can do is to change the allocations of their advised portfolios. You are no longer bound to the 100-0, 80-20, 60-40, 40-60, 20-80, 0-100 allocations. The percentages are now much more flexible.

In addition, you can even add a sector tilt or geographical tilt to your portfolio. For example, let us look at their 100-0 model asset allocations.

Type of fundAllocationWhat the fund invests inGeographical allocation
Dimensional Global Core Equity Fund38%Global developed countries63.27% US9.10% Japan4.75% UK
Lion Global Infinity US 500 Stock Index Fund37%S&P 500 index100% US
Dimensional Emerging Markets Large Cap Core Equity Fund13%Emerging market large-cap36.55% China15.65% Taiwan13.45% South Korea
Dimensional Pacific Basin Small Companies Fund12%Small-cap in APAC59% Japan
Current allocation of 100% Equities of Endowus Cash Portfolio

As you can see, the model asset allocation provided my Endowus is actually pretty well-diversified already. However, let’s say you really want a geographical tilt or sector tilt. Now you can do it!

Construct a completely customised portfolio

I think this is the most interesting feature. Nothing beats the satisfaction of constructing your own portfolio. But whether that can beat Endowus’ Model Portfolio, that’s a story for another day…

But I looked through the funds. Here are some that I found that can be interesting for you. (That are not already in all their model asset allocations)

Schroder International Selection Fund Global Sustainable Growth0.88%11.1% annualized since inceptionInvests in “sustainable growth” companies
(Fund Sheet)
Schroder International Selection Fund Greater China0.95%9.49% annualized since inception (calculated from their cumulative return)Invest in PRC, Taiwan and Hong Kong companies.
(Fund Sheet)
FSSA Regional China Fund1.22%8.9% annualized 10-yearAnother Chinese Investment FundThe Schroder one seems better unless I am missing something out.
(Fund Sheet)
Templeton Shariah Global Equity Fund1.34%3.11% annualized since inceptionInvests in Shariah-compliant equities and debt. Governed by Muslim principles.
(Fund Sheet)
Fidelity Funds – Global Dividend Fund1.495%
Very high fees!
9.82% annualized since inceptionInvests in a globally diversified high-dividend stocks
(Fund Sheet)
Dimensional Global Targeted Value Fund0.55%6.93% annualized since inceptionInvests in smaller companies with cheaper valuations (“value stocks”) traded in global developed countries
(Fund Sheet)
Some interesting funds

These are the funds I find interesting. Play around with the allocations yourself. They seem interesting. However, if you are unsure, always go back to their model asset allocations. They are crafted really well. Endowus Fund Smart is merely an add-on.

Thoughts while I was doing research on Endowus Fund Smart

After all these research on unit trusts, I realised why John Bogle, the godfather of index investing, so strongly believed in index funds. Often times, these unit trusts barely beat the index that it is benchmarked against. Even if it does beat it, the high sales fees offset the alpha achieved. You are probably better off adopting a passive index investing strategy like buying a tax-efficient and low-cost diversified UCITS ETF like CSPX or IWDA.

Okay, that’s besides the point. If you want to find out more about the lists of fees, do take a look here. They offer a lot more than I can cover. Moreover, not everyone is solely interested in equities. Many people want a more diversified portfolio.

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Disclaimer: I am not personally invested in Endowus. This article is not affiliated with them. I written this article because I was interested in their product. Do not take anything in this article as investment advice. It is merely for entertainment purposes.

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