Syfe Income+ Investment Strategy

Introducing Syfe Income+ 

Income+ is a thoughtfully curated discretionary managed portfolio service from Syfe to cater to various income needs of investors. It comprises two investment strategies – Income+ Pure and Income+ Enhance. Depending on individual risk appetite and financial goals, Income+ Pure is tailored for those seeking a regular monthly income with lower risk, while Income+ Enhance is for investors seeking a higher monthly income and potential long-term capital appreciation. These strategies are designed to target monthly payouts ranging from 6.0% to 8.6% p.a.*

The Case for Fixed Income 

Opting for Income+ is a strategic choice, especially in a high interest rate landscape. Income+ stands out for its versatility in meeting different investor requirements. The monthly payouts from these portfolios serve as a regular income stream, making them suitable options for investors who require frequent payouts to cover expenses or who wish to reinvest them for compounded returns.

The current geopolitical and economic uncertainties, unprecedented inflation and high interest rates environment have created favorable conditions for fixed income investing. Bond markets currently offer one of the highest yields and total return potential in almost 20 years and therefore offer a unique value proposition for investors to capture.

Syfe Income+ 

Syfe has constructed the Income+ portfolios based on a multi-step process, which includes defining the investment opportunity set and model guardrails and optimizing allocations based on key macro themes, opportunities and risks. The key differentiated features of Syfe Income+ are:

Best-in-class Strategies: Syfe Income+ portfolios are built using funds managed by a team of high-quality asset managers, namely HSBC, Franklin Templeton and Alliance Bernstein, that rank among the top in Hong Kong for fixed income funds per asset under management (AUM). 

With the asset managers’ forward-looking views and time-tested investment approach, Syfe brings the best of Hong Kong’s fixed income funds to you—bundled in a simple, holistic solution to help you tide over in the face of market uncertainty and rising interest rates.

Active management: Our Income+ portfolios are constructed with  actively managed funds that can adapt to the changing market conditions. We have diversified the Income+ portfolios  by selecting funds which have exposure to different fixed income assets, such as government bonds, corporate bonds, convertible bonds, etc. This helps to reduce the impact of the performance of any single bond or asset class on the overall portfolio. While we continue to advocate passive strategies built using ETFs for most of our growth oriented portfolios, we believe active funds are better suited to solve the core income needs of clients.

Monthly Payouts: Both of the Income+ options aim to pay out monthly dividend distributions. The Income+ portfolio has a minimum funding requirement of HKD 10,000, and clients have an option to switch between receiving a monthly payout directly to their bank accounts or reinvesting the monthly payouts depending on their immediate income needs. For those who opt for payouts to their bank accounts, the portfolios will accumulate the dividends from the constituent funds on a monthly basis and pay the proceeds to clients’ bank accounts within the first 10 days of the following month. 

Institution-like access: We endeavor to bring to our clients the best-in-class institutional strategies at a fraction of the cost that is typically applicable to access them. Even in cases where we use retail share class funds (mainly when they pay monthly dividends), Syfe passes on to the investors any trailer fee rebates it receives from the fund manager(s), resulting in significant cost savings.

Tax efficiency: Dividends are crucial in generating income for investors, but their tax implications can affect your overall returns. Our Income+ portfolios are constructed with funds domiciled in Hong Kong and Luxembourg, providing greater tax efficiency in terms of dividend withholding taxes compared to US-domiciled ETFs. This strategy could potentially save Hong Kong-based investors up to 30% in dividend withholding taxes.

Investment Process

The Syfe Investment team, with decades of investment experience, has carefully curated the Income+ portfolios through an intricate multi-step process. We ran a rigorous qualitative as well as quantitative institutionalized process to thoughtfully pick the funds and the asset managers, with an objective to achieve a target monthly payout while still optimizing for total returns. 

We analyzed a wide range of fixed income funds for their yields, credit qualities, geographical exposure and more, considering the key macroeconomic trends and risks that could potentially affect these assets. The result is two tailored portfolios: Income+ Pure and Income+ Enhance, catering to varying investor needs for regular income with lower risk or higher income with capital appreciation potential. 

Against the current interest rate environment, we have built these portfolios by focusing on globally diversified high quality Investment Grade assets with short to medium duration risk, while also adding exposure to Asia credit. Our aim is to optimize asset allocations to maximize potential income while effectively managing risks.

Income+ solution is part of our discretionary portfolio service, similar to other growth portfolios. We will conduct regular rebalances and, if needed, may switch to optimal funds or fund managers based on market conditions. The Income+ portfolios reflect our ongoing commitment to adapt, innovate, and prioritize your investment goals. 

Income+ With Target Monthly Payouts of 6.0%-8.6% p.a.*

Income+ Pure employs a strategy that focuses predominantly on investment grade quality bonds which typically involves investing in high-quality bonds such as US Treasuries and investment-grade corporate bonds.

Income+ Enhance employs a strategy that focuses on credit to generate higher returns which typically involves investing in higher-yielding, lower-rated bonds such as high-yield corporate bonds, in addition to equity and alternate income assets.

Source: Syfe, fund factsheets. As of 29 Feb 2024. Statistics are based on the weighted fund allocation within each portfolio.
* Refer to the Definitions section to understand these terms.
* Refer to full risk disclosures at the end of the page.

Composition snapshot

Income+ Pure

Income+ Enhance 

Summary

At Syfe, our objective with the Income portfolios is clear and straightforward: we want to empower you with a regular stream of passive income that aims to meet your financial goals through the years. We believe in the importance of diversification, which is why we incorporated global income into these portfolios. This aspect is particularly vital in today’s dynamic financial climate where interest rates are on the rise and market conditions are uncertain. Our Income portfolios have been carefully designed to complement any financial strategy, whether you’re saving for a comfortable retirement, generating income for your everyday expenses, or looking to grow your wealth over the long term. 

We understand that every investor’s journey is unique, and at Syfe, we are here to support that journey with our thoughtfully constructed portfolios and flexible investing approach. If you’re interested in enhancing your financial future with regular income, we invite you to learn more about our Income Portfolio today. Start exploring the opportunities that await you in the world of investing with Syfe. Find out more here

Definitions

Target Monthly Payout

Income+ portfolio is built with an objective to achieve a Target monthly payout range, in current market environment. Target monthly payout is not guaranteed, and is subject to market movements. Past distributions are not necessarily indicative of future trends, which may be lower. A positive monthly payout or distribution yield does not imply a positive return. Investment involves risks.

In some cases, monthly payouts may be made from the income or capital of the funds in your portfolio, which is decided by the constituent fund managers. The funds may also charge some of their management fees to the capital, which can increase the available income for dividends. This could lead to paying dividends out of capital and may result in an immediate reduction of the fund’s net asset value.

For more detailed information about income statistics, please visit fund manager websites: 

Alliance Bernstein https://www.abfunds.com.hk/hk/zh-hk/investor/home.html 

Franklin Templeton https://www.franklintempleton.com.hk/en-hk 

HSBC https://www.hsbc.com.hk/ 

Yield to Maturity

Yield to Maturity (YTM) of a bond is the total return that an investor stands to receive if all scheduled payments are made on time and the bond is held until maturity. Yield to Maturity (YTM) of the portfolio is the weighted average of the YTM of the bonds held in the constituent funds in the portfolio. YTM is reported gross of fees, the deduction of which will reduce the yield. It does not represent the portfolio’s return.

Source: Syfe, Bloomberg, Fund manager factsheets. As of 29 Feb 2024. Statistics are based on the weighted fund allocation within each model portfolio.

Duration 

Duration is a measure of the sensitivity of the price of a bond to a change in interest rates. Generally, the higher a bond’s duration, the more its value will fall as interest rates rise, because when rates go up, bond values fall and vice versa. Duration of the portfolio is the weighted average of the duration of the individual bonds held in the constituent funds of the portfolio. 

Source: Syfe, Bloomberg, Fund manager factsheets. As of 29 Feb 2024. Statistics are based on the weighted fund allocation within each model portfolio.

Credit Quality

Credit quality gives a snapshot of the portfolio’s overall credit quality. It is an average of each bond’s credit rating held in the constituent funds, adjusted for its relative weighting in the portfolio.

Source: Syfe, Bloomberg, Fund manager factsheets. As of 29 Feb 2024. Statistics are based on the weighted fund allocation within each model portfolio.

Beta Beta vs MSCI World Index measures the volatility of the returns of the portfolio against the broader market (MSCI World). It is a measure of risk and allows investors to gauge how sensitive the portfolio might be to macro market risks. For positive equity beta below 1, lower equity beta value implies lesser risk as it denotes lesser positive correlation to the broader market while a higher value implies greater risk.

US Gov. Related

May include nominal and inflation-protected Treasuries, Treasury futures and options, agencies, FDIC-guaranteed and government-guaranteed corporate securities, and interest rate swaps.

Investment Grade Credit (“IG”)

Investment Grade bonds are bonds that are believed to have a lower risk of default and receive higher ratings by credit rating agencies, namely bonds rated Baa (by Moody’s) or BBB (by S&P and Fitch) or above. These bonds tend to be issued at lower yields than less creditworthy bonds

High Yield Credit (“HY”)

High Yield bonds are bonds that are believed to have a higher risk of default and receive lower ratings by credit rating agencies, namely bonds rated Ba or below (by Moody’s) or BB or below (by S&P and Fitch). These bonds are typically issued at a higher yield (for example, a higher interest rate) than more creditworthy bonds, reflecting the perceived higher risk to investors.

Equities & Convertibles

Equities & Convertibles include globally traded common or preferred stocks, convertible bonds or equity linked notes.

Geography

Geographic exposure relates principally to the domicile of the issuers of the securities held in the product, added together and then expressed as a percentage of the product’s total holdings. However, in some instances it can reflect the country where the issuer of the securities carries out much of their business.

Fund Level Fees

Fund Level Fees refer to the unified management fees of the constituent funds which are charged by the fund managers, in this case HSBC, Franklin Templeton and Alliance Bernstein.

Net Fund Level Fees

Net Fund Level Fees of the portfolio is the weighted average of the net unified management fees of the constituent funds after accounting for rebates. For institutional share class funds, the gross and net fund level fees are the same. For retail share classes, the net fund level fees are calculated by subtracting the unified management fees of the constituent funds with applicable trailer fee rebates which Syfe wholly passes on to its clients.

Trailer Fee Rebate

Trailer Fee Rebate is a fee that a fund manager pays intermediaries. The rebate is usually applicable when the fund’s share class is retail. Currently, Syfe passes on to clients any trailer fee rebates it receives for any of the constituent funds of Income+ portfolios.

Payout Calculator Disclaimer

This calculator is meant for illustrative purpose only. Monthly income refers to the selected portfolio’s Target monthly payout midpoint to calculate total investment required. It does not represent the estimated monthly payout that the portfolio can achieve in future. Target monthly payout is not guaranteed, and is subject to market movements. As of 29 Feb 2024 14:30 HKT. Refer to definition of Target Monthly Payout here.

Risk Disclosures

Investment involves risks including possible loss of the principal amount invested. The portfolios and/or the constituent funds in the portfolios may not achieve their investment objectives. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment. Investors should consider the investment objectives, risks, charges and expenses carefully before investing. Some of the risks within the constituent funds include liquidity risk (difficulty selling an asset), interest rate risk (changes in interest rates affecting the market value), market risk (potential losses from market-wide changes), credit risk (risk of default on a debt), and fund management risk (the chance that the constituent fund managers’  investment strategies do not work as planned). Some of the constituent funds may also use derivatives. You should understand the risks associated and be willing to assume the risks before making any investment decision.

The information in this website is for information only. The information and opinions contained in this publication has been obtained from sources believed to be reliable at the time of writing, but Syfe makes no representation or warranty as to its adequacy, completeness, accuracy or timeliness for any particular purpose. Opinions and estimates are subject to change without notice. Syfe does not provide legal, tax or accounting advice.

There is no assurance that the credit ratings of any securities mentioned in this publication will remain in effect for any given period of time or that such ratings will not be revised, suspended or withdrawn in the future if, in the relevant credit rating agency’s judgment, the circumstances so warrant. The value of any product and any income accruing to such a product may rise as well as fall.

Last updated: 29 Feb 2024