An Investment Approach Built Upon Enduring Principles That Withstand the Test of Time

high risk high reward core satellite

At Syfe, we believe that better investing has the power to shape better outcomes in life. Syfe was built on the mission of bringing institutional level investment offerings to everyone, at the fraction of the cost that traditional institutions charge.

Here, we cover Syfe’s investment approach to deliver long-term returns, why we use ETFs as building blocks of our portfolios, and our view on China. 

Table of Contents:

Syfe’s investment approach

Our investment approach builds on decades of research, expertise and experience, leading to strategies that can withstand the test of time. Syfe espouses a passive, long term investment strategy that minimises cost, coupled with systemically and thoughtfully applied analysis to deliver the most well-rounded, consistent long-term results that aligns to an individuals’ risk and goals.

Syfe’s Core portfolio allocations have a broad-based exposure to the global markets, and are diversified across asset classes, sectors and geography. The equity allocations in the portfolio are further optimised by incorporating factors that drive long term risk-adjusted returns. 

The chart below shows the strategic asset allocations for each of our portfolios. The key difference between each Core portfolio is their exposure to stocks and bonds, which in turn determines their overall risk level. 

Our portfolios are rebalanced twice a year to maintain the strategic asset allocation in order to improve long term returns. This is done through: 

  1. Asset Class Risk Budgeting: generating stable asset allocation where overall risk of the portfolio is distributed across the portfolio. 
  2. Smart Beta (Factor Investing): seeking to capture risk-premia 

We do not make tactical changes in our portfolios based on near term market “noises” like active fund managers do, and stay true to our client’s agreed asset allocation based on their portfolios. 

As such, with Core portfolios, investors will find that their asset allocation is relatively stable over time. 

Delivering long term returns

While ranking of performance over any time period is possible, our goal is to build long term wealth. This takes time and it is important to be invested and consistent. 

The graph below highlights how a small difference in returns can impact the growth of $10,000 in capital over the long-term. Syfe’s approach focuses not on trying to beat the market, but on systematically harvesting proven factors that in turn translates to better risk-adjusted return overall.

*100% Equity portfolios constructed using mutual funds vs Syfe Equity100 vs MSCI World (Benchmark for Global Equities). 
Source: Syfe, live and internal back tested data. Past returns are not a guarantee of future performance. Excludes impact of management fees for easy comparison with benchmark.    

Using ETFs can save you money over time, and in turn impact returns

ETFs aim to mimic the performance of the index they track and provide a highly efficient, low cost and passive way to invest into the global markets. The passive investing momentum has accelerated in the last few years: market share of passively managed US equity funds increased to 48.1% in 2018, doubling from 24% in 2010 and 12% in 2000. 

While ETFs have been the poster childs of passive investing, traditional active fund managers have picked up on the trend by introducing index funds to capture a piece of this movement. Investors need to carefully evaluate index funds before investing as some can come embedded with much higher fees than their ETF counterparts. 

Take for example, investing into the world’s best known index – S&P 500. One can easily invest into it through ETFs such as VOO, IVV and CSPX which are managed by the world’s leading asset managers. The cost of investing into these is just 0.03%-0.07% a year.

On the other hand, a SGD-hedged index fund on S&P 500, which is essentially a wrapper on an ETF such as VOO, can cost 20 times as much – 0.60% – 1.00%. It is important to note that not all index funds charge low fees. There are also hidden fees when investing into funds / unit trusts compared to ETFs. Transaction costs and other fees such as brokerage commissions or sales charges are not included in a fund’s expense ratio. 

^SGD Index fund references index funds such as Lion Global Infinity U.S. 500 Stock Index Fund
*Transaction and hedging costs for funds are estimated to be 0.5% on average based on Lumint data.
**Mutual fund bid-offer spread estimated to be approx. 0.10% based on data from National Bank Financial

These hidden costs have a direct impact on returns. As you can see from the table below, while CSPX has performed better than the index, the SGD Index fund’s performance is about 1.50% lower on an annualized basis over the last 10 years.

Data as of 31 Jan 2022, returns are net of sales charges and other embedded fees

On top of this, when you add in platform fees, an investor’s overall cost can go as high as 1.83%. This is even with trailer fees rebates that are provided to offset costs.

Our view on China as part of your long-term portfolio

China has been an important topic weighing on investors’ minds given the regulatory cycle, the ongoing policy responses to Covid-19 as the world re-opens, and potentially escalating tensions with the US.

China continues to be the world’s second largest economy and contributes almost 18.5% to the world GDP based on PPP (Purchasing Power Parity) terms in 2021. To reflect that and capture long term secular growth trends in China, Syfe Core portfolios are optimised to have a more representative allocation to China ranging between 2-13% depending on the risk level of the portfolio selected.

The country is under-represented in most global equity portfolios with benchmarks such as MSCI ACWI (All Country World Index) having a less than 5% allocation. In a global portfolio that is diversified across sectors and countries, China plays an important role in strategic asset allocation.

There are risks associated with investing into China. We have seen this recently from drawdowns in Chinese equity and particularly technology stocks over the last year. Regulatory changes have shaken the stock market historically too, but long term investors will appreciate that the downturn is tied to near term policy uncertainty rather than broader economic growth concerns. As demonstrated by the rebound in March 2022 and continued strong sector flows, China is deemed relevant in a global equity portfolio. 

One place where your wealth lives

At Syfe, we are a mission-driven company dedicated to simple, smart yet powerful investing guided by enduring principles that have withstood the test of time. Our focus will and always continue to be delivering institutional level investment offerings at a fraction of the cost, to best support our customers in meeting their financial goals; whether it is retirement, financial independence, children’s education or buying a house. To this end, we are heartened that many investors continue to trust us to grow their money in the best way possible. 

2022 will be a massive year of growth for us as we take our mission across Asia, allowing even more people across the region to participate in attaining better outcomes in life through better investing. Our team will continue to be relentless in building out more products and services in Singapore and beyond, to be the one place where your wealth lives. 

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