Syfe Cash+: Portfolio Re-optimisation and Performance Update (2021)

Syfe Cash+ delivered actual annualised returns of 1.33% as of 31 December 2021, demonstrating resilience despite the continued volatility in the bond market. 

With higher projected returns than bank deposits, no lock-in, zero fees, and quick, free withdrawals, Cash+ has served clients as an attractive alternative to most traditional bank savings accounts.

Why we are re-optimising Syfe Cash+

Cash+ was designed as a way for people to get more out of their cash savings. That remains our goal as we continuously work to improve and optimise our cash solutions.

In our conversations with clients, one feedback we often hear is that many people have short-term cash management needs (1-3 months). For clients with longer-term cash managements, although they may prefer higher yields, a solution which has minimal volatility still takes precedence. Consequently, a majority of clients prefer stable returns with almost no volatility for their cash savings. 

At Syfe, we take client feedback seriously. To provide our clients with a cash management product that is in line with their specific needs and risk profile, we are re-optimising your Syfe Cash+ portfolio over the next 1 – 2 weeks. 

How we are re-optimising Syfe Cash+

After a fairly volatile year for fixed income solutions, we recognise that many clients seek a more defensive cash management product. They want stable yield with very minimal drawdown and virtually no volatility, even if the return potential is slightly lower. 

As such, we are reoptimizing the Syfe Cash+ portfolio and revising the projected returns as follows:

  • LionGlobal SGD Money Market Fund (allocation remains at 30%)
  • LionGlobal SGD Enhanced Liquidity Fund (allocation increases from 35% to 70%) 
  • Lion Global Short Duration Bond Fund (allocation changes from 35% to 0%)
  • Projected return of 1.2% p.a. (Note: The projected return for Syfe Cash+ has been revised to 1.5% p.a. as of June 2022)

Comparing the current and re-optimised Cash+ portfolios 

Returns

The chart below show the monthly performance of the current and re-optimised Cash+ portfolios.

Syfe Cash+ was launched in January 2021. As shown above, the overall 2021 calendar year return of the current Cash+ and re-optimised Cash+ portfolios are similar. The larger drawdown and subsequent recovery of the current Cash+ portfolio is largely attributable to the LionGlobal Short Duration Fund as it has a longer duration and lower credit quality as compared to the LionGlobal Money Market and Enhanced Liquidity funds. 

While the projected return of the re-optimised Cash+ portfolio will dip slightly to 1.2% p.a, we believe the more defensive nature of the portfolio will cater to clients who are:

  1. looking for a place to park their cash for short-term liquidity needs and 
  2. hoping to earn more than the bank deposit rates or slightly enhanced rates that require additional steps such as depositing income monthly and/or reaching a target spend amount. 

(Note: The projected return for Syfe Cash+ has been revised to 1.5% p.a. as of June 2022)

Portfolio characteristics

The current Syfe Cash+ portfolio has a duration of 1.25 years (15 months) and higher credit exposure as compared to the re-optimised Cash+ portfolio which has a duration of 0.73 years (9 months). We covered the duration and credit exposure of the current Cash+ portfolio in our update here.)

What this means is that the current Cash+ portfolio experiences higher volatility when markets turn choppy. As shown below, the LionGlobal Short Duration Fund contributed more to the negative performance of Syfe Cash+ during the Huarong incident and Evergrande contagion in April and October 2021.

The new, re-optimised allocation results in a portfolio with shorter duration and less exposure to credit risk since the majority of its holdings are in high quality short-term money market and debt instruments. From the graph above, you can see that the money market and enhanced liquidity funds (red and blue lines) experienced almost no volatility during the adverse market events in 2021. 

As such, the re-optimised Cash+ portfolio is positioned more defensively, especially as volatility is expected to remain elevated as interest rates rise this year.

Risk metrics

Based on Syfe’s internal back tested data, over the past three years, the re-optimised Cash+ portfolio experienced only 35 days where its daily returns turned negative. Its maximum drawdown (negative return from peak to trough) was 0.06%. 

The current Cash+ portfolio experienced almost five times as many negative days (173) over the same time period. Its maximum drawdown was 0.75%. That said, it is important to remember the risk-reward relationship. In a low interest rate environment, to get higher returns, investors will have to take on higher risk. While the current Cash+ portfolio does have more fluctuations in its daily returns, investors have been compensated for the incremental volatility in the form of higher returns. 

Subscription / redemption timelines

To better cater to our clients’ liquidity needs, Syfe Cash+ has introduced a new quick withdrawal feature. You can now receive your withdrawn Cash+ proceeds on the same day at 7pm if you submit a withdrawal request before 11am on business days. 

This is a first-of-its-kind feature that no other cash management product offers. 

You can also make a same-day transfer from your Cash+ portfolio to another Syfe portfolio. Simply submit your transfer request before 11am on a business day and your funds will be transferred to your new portfolio and trades placed by 7pm.

Kindly take note that the limit for same-day quick withdrawals and transfers is S$10,000. Following the re-optimisation of Syfe Cash+, our withdrawal processing timeline will be improved to 2 – 3 business days. Amounts above the same-day quick withdrawal and transfer limit will be processed in accordance with our new timelines. 

How often will Syfe Cash+ be re-optimised?

We do not expect another re-optimisation for Cash+ in the foreseeable future. The re-optimisation exercise underway now is the first since Syfe Cash+ was launched in January 2021.

All existing returns earned in 2021 for the current Cash+ portfolio have been accrued. The projected returns of 1.2% p.a. for the re-optimised portfolio is a forward looking projection for 2022.

(Note: The projected return for Syfe Cash+ has been revised to 1.5% p.a. as of June 2022)

The re-optimised portfolio is better positioned against rate hikes

Inflation soared globally in 2021 due to higher energy prices and coronavirus-related supply chain bottlenecks. To bring down inflation pressures, central banks are moving to raise interest rates. The Federal Reserve has said that it would end its bond purchases and pave the way for interest rate hikes by the end of 2022 to fight inflation. 

Against this backdrop, we expect more volatility in money market products going forward. When interest rates rise, bond prices fall. For assets with a shorter duration – such as the re-optimised Syfe Cash+ portfolio – rising rates allow for the underlying bonds to be reinvested at a higher interest rate. This not only provides a higher expected return but could also offset the negative impact of short-term price movements.

With rate hikes on the horizon this year, the re-optimised Syfe Cash+ portfolio is positioned more defensively compared to cash management products with longer duration and greater credit risk.

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