Are you thinking of getting fixed deposit rates without the lock-in? In my last article about MoneyOwl WiseSaver, I provided a basic introduction to the company and the underlying instrument, Fullerton SGD Cash Fund.
This time, I’ll expand on it to talk more about the underlying instruments and more importantly, how it differs from cash management solutions provided by other robo-advisors, and why it is the lowest risk option.
Current Yield For Robos’ Cash Solutions
With the current high-interest rate environment, robo-advisors have been constantly updating their website to reflect the climbing rates which are becoming more and more attractive.
Below are the base tier i.e. safest options for each of the robo-advisors for their cash management solutions.
- MoneyOwl WiseSaver – 4.09%
- StashAway Simple – 3.5%
- Syfe Cash+ – 3.7%
- Endowus Cash Smart (Secure) – 3.7%
As an investor who is looking for a place to park my idle cash funds, the number one question I have is – what is the difference between them?
Robos’ Money Management Solutions – Why The Difference?
Although all of them as marketed as cash management solutions, they are very different from one another when it comes to their underlying instruments.
- Fullerton CF = Fullerton SGD Cash Fund (S$2,500m) <Link>
- LionGlobal ELF = LionGlobal SGD Enhanced Liquidity Fund (S$500m) <Link>
- LionGlobal MMF = LionGlobal SGD Money Market Fund (S$500m) <Link>
The table above says a lot and yet, it has left a lot unsaid.
Where Is The 4% Yield From?
The funds I’ve linked have a lot of information but I know you’ve probably skipped right past them.
To summarize what I have learned from Endowus, the main categories of funds from lowest (to higher risk) used are:
- Cash Fund (lowest risk) e.g. Fullerton SGD Cash Fund
- Money Market Fund
- Short Duration Bond Fund
The primary thing to note is that when it comes to a cash fund, it invests primarily in fixed deposits, and they are considered the lowest risk of any investment fund with the potential loss risk of 0.01% or less in the case of a maximum drawdown.
What Is The Difference: Cash Fund, Money Market and Short Duration Bond Fund?
Below is a handy comparison table I have compiled for my easy reference.
As far as I know, cash fund is an extremely strict class of investment products that are regulated under the MAS’ Code on Collective Investment Schemes which states that there are explicit requirements that the names should be appropriate, not be undesirable and not be misleading.
According to this MoneyOwl article, there is also explicit guidance that the word “cash” should not appear in the names of funds that do not comply with various money market requirements, including certain asset and duration limits.
Also, at least 10% of the fund’s net asset value should be in daily maturing assets and at least 20% in weekly maturing assets to qualify.
Referencing the table that I have provided above, the only underlying instrument of MoneyOwl WiseSaver is Fullerton SGD Cash Fund, and it is a cash fund.
Endowus Cash Smart (Secure) also has a 50% allocation of Fullerton SGD Cash Fund with the remaining 50% in LionGlobal SGD Enhanced Liquidity Fund.
For both Syfe and StashAway, their underlying instruments do not include any cash funds.
- Cash funds invest in only fixed deposits and have the lowest risk
- For money market funds and short-duration bond funds, the risk level rises in tandem with their short-term debt instruments’ duration
So, what are the risks for money market funds or bond funds?
First Risk – Credit Risk
Credit risk is the probability of a financial loss resulting from a borrower’s failure to repay a loan.
This point is easy to understand so little explanation is needed.
Remember the Evergrande incident and the subsequent contagion effect in 2021? Chinese property giant Evergrande failed to meet interest payments to international investors.
Back then, both my Endowus Cash Smart (Enhanced) and (Ultra) portfolios took a small hit as the market reacted to the news.
Second Risk – Interest Rate (Price) Risk
Investopedia states that interest rate risk is the potential for investment losses that can be triggered by a move upward in the prevailing rates for new debt instruments.
When interest rates go up (like what happened from 2022-2023), the value of a bond or other fixed-income investment in the secondary market will decline.
The Majority Of Fullerton SGD Cash Fund Holding’s Maturity Is Less Than 4 Weeks
Firstly, Fullerton SGD Cash Fund is invested in only fixed deposits so there is no credit risk.
Secondly, the majority of Fullerton SGD Cash Fund’s fixed deposit holdings maturity is less than weeks which is extremely short in duration, which grants it some sort of immunity to interest rate risk.
I grabbed the following maturity data from the Fullerton SGD Cash Fund factsheet that was updated on April 2023.
This means that even as interest rate rises, there is very little impact due to interest rate (price) risk.
Looking at the performance chart, even as bonds and fixed-income solutions experienced historic losses in 2022, Fullerton SGD Cash Fund was hardly affected.
Yield Is Volatile But Likely To Remain High In Short Term
The chart below might look familiar to you as they have appeared in the news in recent months.
The Fed’s dot plot is a chart that records each of the Fed official’s projections for the central bank’s key short-term interest rate.
With the Fed Dot Plot looking like the above, plus CME FedWatch Tool seemingly indicating that we might even see another hike in July after a pause this month, it looks like interest rates will continue to look elevated in the short term before it tapers off in 2024 and 2025.
However, it is worth highlighting that in the past, when interest rates were persistently low for many years, Fullerton SGD Cash Fund has likewise provided minimal returns.
Well, just to be clear, this means that there is absolutely nothing magical about it.
Due to the nature of the fund, you’ll notice that the rate is provided in the form of a 5-day moving average and it will fluctuate based on market conditions.
Make hay while the sun shines, shall we?
TLDR On Fullerton SGD Cash Fund
The underlying instrument is Fullerton SGD Cash Fund and it is managed by Fullerton Fund Management.
Since its inception on 3rd February 2009, the fund holds its assets primarily in Singapore Dollar Deposits with varying terms of maturity of not more than 366 working days with eligible local financial institutions.
The current fund size as of 30th April 2023 is SGD$2,621 million
Fullerton Fund Management is an Asia-based investment specialist, with capabilities that span equities, fixed income, multi-asset, treasury management, and alternatives, including private equity.
The firm was incorporated in Singapore in 2003 and is a subsidiary of Temasek.
In 2018, NTUC Income, a leading Singapore insurer, became its minority shareholder.
Frequently Asked Questions
The top questions asked about MoneyOwl WiseSaver and Fullerton SGD Cash Fund are below.
What Is Fullerton SGD Cash Fund Expense Ratio?
The Fullerton SGD Cash Fund expense ratio is 0.15%.
How Much In Fees Are We Paying When We Invest Via MoneyOwl WiseSaver?
There is only a single fund level fee of 0.15% p.a. that has already been factored into the price of each unit which is paid directly to Fullerton Fund Management.
There are no other fees chargeable by MoneyOwl beyond this.
What Is The Minimum Amount To Invest In MoneyOwl WiseSaver?
Unlikely many other investment options, the minimum amount to invest in MoneyOwl WiseSaver is only $10, which is pretty much as low as it can get.
What Is The Lock-in Period, If Any?
There is no lock-in period for MoneyOwl WiseSaver.
However, do note the following important points pertaining to withdrawals.
- For WiseSaver portfolios, the minimum withdrawal amount is $50.
- Processing of a withdrawal takes time and it will usually require around 1 to 2 business days to withdraw your funds from WiseSaver.
- WiseSaver → WiseSaver Cash Account = 1 business day
- WiseSaver → Bank Account = 2 business days
The standard understanding is that instructions received after 3pm will only be processed the next business day, so do take note if liquidity is an important criterion for you.
$20 Referral Rewards When You Sign Up
MoneyOwl WiseSaver has served me well and this is one product that has provided me with close to 4% yield for months simply by parking part of my idle, emergency funds.
My usual skin-in-the-game screenshot is below.
Just like many personal finance platforms, MoneyOwl has a referral program that grants you some benefits when you start using them.
At no additional cost to you, my personalized referral link would give your MoneyOwl portfolio a head-start (save $20 to $60 with the free Grab voucher and invest them into WiseSaver) when you decide to start an investment portfolio with them, and this includes WiseSaver too!
Referral terms and conditions here for full disclosure.
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Hello! I Am Kevin
At the age of 30, I am the Personal Finance Blogger who laid claim to a negative net worth of minus $25,755 – and decided to turn things around.
I am married to a lovely wife and that means dual income with no kids. In my free time, I chase miles so that we can fly in business class. My hobbies include making coffee money off this blog and sharing everything I know with you.