Digital wealth manager Stashaway has launched Simple Plus — its second cash management portfolio — with a projected 2.7%–3.2% p.a. return.
This is about twice the current projected rate of return of Simple, the cash management portfolio Stashaway launched in November 2019.
According to Stashaway, Simple Plus has no minimum balance, no cap on yields and no lock-in period. Stashaway is also waiving management fees of 0.05% p.a. until June 30, 2023.
This promotion is valid on portfolios funded by both personal and Supplementary Retirement Scheme (SRS) bank accounts, and the projected rate of 2.7%–3.2% p.a. is inclusive of the fee waiver.
“Simple and Simple Plus are both ultra-low-risk, but Simple Plus offers a higher projected rate than Simple. That’s because it comes with just slightly more risk,” says Stashaway in a July 14 email to account holders.
Simple Plus’ underlying funds are: 20% in the LionGlobal SGD Enhanced Liquidity Fund, 35% in the Nikko AM Shenton Short Term Bond Fund and 45% in the LionGlobal Short Duration Bond Fund.
See also: Stashaway raises cash portfolio rates to match Syfe, Endowus promises highest returns
This is in comparison to Stashaway Simple’s underlying funds of 30% in the LionGlobal SGD Money Market Fund and 70% in the LionGlobal SGD Enhanced Liquidity Fund.
On July 8, Stashaway raised the projected return rate of Simple to 1.5% p.a. from 1.3% p.a., along with a “re-optimised allocation” of the two funds, which were previously evenly weighted.
“Simple Plus is a great low-risk investment option for the longer term. But because it comes with slightly higher risk compared to Simple, it also has the potential for short-term volatility. That means Simple Plus wouldn’t be the best place to park the cash you need in a couple of months,” says Stashaway in a note on its website.
See also: Robo-advisors raise projected returns of cash portfolios as interest rates rise
Stashaway says the “minimal, yet calculable, risk” comes from the allocation to short-duration bonds, which are more sensitive to interest rate movements and economic conditions. “Because of these factors, we recommend you hold your cash in Simple Plus for at least 12 months in order to reap the full benefits of higher rates while keeping risk in check.”
According to Stashaway, the historical maximum drawdown for Simple Plus is a “mere” -2.32% as of June 30. “This means that even in the worst possible scenario, this portfolio hasn't lost more than 2.32% in value from a particular highest point to its lowest point (from peak to trough).”
Cash portfolios on the rise as interest rates grow
Stashaway’s decision to raise Simple’s projected rate of return on July 8 matches competitor Syfe’s hike on its Cash+ portfolio. On June 20, Syfe raised the projected return rate of its cash management portfolio to 1.5% p.a. from 1.2% p.a. previously.
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.
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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.
