- Until we see yield curves dis-invert and/or longer-end treasury yields re-price higher, shorter-end rates remain attractive.
- Investors can consider our Auto-Sweep facilities or customise their own cash management portfolio.
Short-end cash rates still look very attractive supported by higher yields across shorter-tenor treasuries as the curve stays persistently inverted in Singapore and the US. Until we see the curves dis-invert and/or longer-end treasury yields re-price higher, shorter-end rates remain attractive and we continue to prefer shorter-duration bonds.
Investors who wish to take advantage of these attractive short-end yields have no shortage of cash-like options on our platform, ranging from our easy-to-invest Auto-Sweep facilities to your very own customised cash management portfolio!
Related article: Why we continue recommending Short Duration Bonds in 2024
Auto-Sweep: Three benefits of this easy-to-use facility
(Note: All yield figures in this article are annualised unless otherwise stated.)
Our Auto-Sweep facilities are discretionary cash management accounts managed by iFAST, available in three currencies: SGD, USD, and CNH. There are three main benefits of using these Auto-Sweep facilities.
- The Auto-Sweep facilities are our most liquid options for investors. First, you can immediately use Auto-Sweep monies with no delays for any other investments on our various iFAST platforms. Redemption into cash is also very quick - with SGD on a T+1 basis and USD / CNH both on a T+0 basis. In other words, if you submit a cash-redemption request today, the monies will be credited to your cash account by the end of tomorrow (SGD: T+1) or today (USD / CNH: T+0) depending on the currency.
- They also come with little risk given their constituent holdings. For example, our SGD Auto-Sweep’s underlying holdings are largely made of cash, fixed deposits (especially Fullerton SGD Cash Fund), and Singapore T-Bills (especially LionGlobal SGD Enhanced Liquidity Fund and United SGD Money Market Fund).
- Finally, investors can enjoy attractive yields on top of said high liquidity and little risk. The SGD Auto-Sweep currently has an indicative yield of 3.238%, while the USD Auto-Sweep has an indicative yield of 4.694%.
Looking for something more customised? Create your own portfolio!
Investors who are looking for something customised can consider making their own cash management portfolio. We have created a simple three-step guide to making your cash management portfolio.
1. Choose an anchor
Anchors are ‘safer’ funds which aim to generate reasonable returns at relatively lower volatility, and primarily help to act as portfolio stabilisers. We provide our top picks for ‘anchors’ below (Table 1).
Table 1: Suggested anchors
| Fund | Duration (years) |
Indicative Gross Yields (%) | Indicative Expense Ratio (%) | Average Credit Rating |
Currency Class Availability |
| Fullerton SGD Cash Fund* | 0.13 | 3.96% | 0.21% | - | SGD |
| Fullerton USD Cash Fund* | 0.11 | 5.20% | 0.25% | - | USD |
| LionGlobal SGD Enhanced Liquidity Fund |
0.20 | 4.03% | 0.42% | AA | SGD |
| LionGlobal SGD Money Market Fund |
0.21 | 4.04% | 0.33% | AA- | SGD |
| Source:
Fund factsheets and PHS, iFAST compilations, iFAST estimates. Data as of latest available factsheets / data from fundhouses. *Fullerton funds provide weighted average maturities (WAM) instead of duration. No average credit ratings as they primarily invest in deposits. |
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Fullerton SGD Cash Fund: This fund primarily invests in SGD deposits with varying maturities of not more than 366 days, and can also invest in Singapore government-related bills. It is also our Recommended Fund in the ‘Money Market’ category.
Fullerton USD Cash Fund: Similar to its SGD counterpart above, this fund primarily invests in USD deposits with varying maturities of not more than 366 days, and can also invest in US government-related bills.
LionGlobal SGD Enhanced Liquidity Fund: This fund’s holdings contain a majority allocation to Singapore government-related securities (e.g. MAS T-Bills). It aims to maintain a weighted average portfolio credit rating of A- and a weighted average duration of around 12 months.
LionGlobal SGD Money Market Fund (new inclusion!): Similar to the Enhanced Liquidity fund above, its holdings also contain a majority allocation of Singapore government-related securities. However, its total sovereign exposure is slightly lower than Enhanced Liquidity (51% vs 67%) and it has a slightly lower credit rating as well (AA- vs AA), with the upside of slightly higher indicative gross and net yields.
2. Add yield enhancer(s)
Yield enhancers are also relatively safe, but they generally come with higher yields and correspondingly higher risks relative to the anchors above. We select only investment-grade bond funds (and exclude high-yield bond funds), as a cash management portfolio should remain prudent and avoid excessive risk.
Table 2: Suggested yield enhancers
| Fund | Duration (years) |
Yield to Maturity (%) |
Expense Ratio (%) |
Average Credit Rating |
Currency Class Availability |
| HGIF - Ultra Short Duration Bond Fund* | 0.32 | 5.87%* | 0.47% (SGD) 0.44% (USD) |
A | SGD, USD |
| LionGlobal Short Duration Bond Fund** | 1.54 | 5.41%** | 0.57% (SGD) 0.57% (USD) |
BBB+ | SGD, USD |
| Maybank Enhanced Income Fund |
0.69 | 3.69% (SGD) 5.19% (USD) |
0.32% (SGD) 0.32% (USD) |
A+ / A | SGD, USD |
| Nikko AM Shenton Short Term Bond Fund** | 1.12 | 4.79%** | 0.41% (SGD) 0.41% (USD) |
A- | SGD, USD |
| United SGD Fund** | 0.99 | 4.31%** | 0.67% (SGD) 0.69% (USD) |
BBB+ | SGD, USD |
| Source:
Fund factsheets and PHS, iFAST compilations, iFAST estimates. Data as of latest available factsheets / data from fundhouses. *Base share class is USD. **Base share class is SGD. |
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HGIF - Ultra Short Duration Bond Fund (new inclusion!): This fund primarily invests in short-term bonds with a focus on corporates, particularly those in the Banking sector (36%). Its largest geographical allocation is to the US (58%), though the remaining 42% is fairly well-diversified across other Developed Markets (e.g. in Canada / Europe / Japan).
LionGlobal Short Duration Bond Fund: This fund primarily invests in global bonds with a large focus on Singapore bonds (47%). However, it has a fairly long duration compared to other funds in the table above, while its credit rating of BBB+ is also slightly lower than some of its peers. As such, we consider this as a relatively higher-risk option.
Maybank Enhanced Income Fund: This fund primarily invests in Asian bonds, though it has a global mandate and also a 10% allocation to the UK and a 9% allocation to Australia currently. It has one of the higher average credit ratings amongst the funds in the table above, which likely reinforces why the maximum drawdown over the past 3 years was relatively limited.
Nikko AM Shenton Short Term Bond Fund: This fund primarily invests in good-quality Asian short-term bonds, though it has the flexibility to invest globally as well. It aims to outperform the 3M SIBOR and is also our current Recommended Fund in the ‘Singapore-Centric’ category.
United SGD Fund: This fund primarily invests in Asian bonds with a diversified exposure across the region. It is also our current Recommended Fund in the ‘Singapore-Centric’ category.
3. Mix and match
Investors can then mix and match their desired anchors and yield enhancers, adjusting their allocations based on their risk tolerance. For instance, lower-risk portfolios should have a larger allocation to anchors. Higher-risk portfolios can have a larger allocation to yield enhancers, though we emphasise the need for diversification in such higher-risk portfolios.
Model DIY cash management portfolios
We have created three model portfolios in both SGD (Table 3) and USD (Table 4) as starting points for investors wondering how to structure their DIY cash management portfolio. However, for CNH, we find there are insufficient funds in this space to DIY your own portfolio, and recommend investing in the Auto-Sweep directly.
These model portfolios are named ‘Conservative’, ‘Moderate’, and ‘Aggressive’. As we move from ‘Conservative’ to ‘Aggressive’, investors should expect generally higher levels of risk, observed through the increases in historical maximum drawdown.
As a general guide, all of these model portfolios also come with benefits such as (i) high liquidity; (ii) low risk; and (iii) attractive yields. On a relative basis, however, these portfolios are slightly less liquid (redemption schedules of T+1 to T+4) and riskier compared to their respective Auto-Sweep facilities, but with the benefit of higher indicative yields. We think these model portfolios are best suited for investors who are looking for even greater yield uplifts over our Auto-Sweep facilities and are willing to forgo a slight amount of liquidity and safety.
Table 3: Model SGD cash management portfolios
| Risk Profile | SGD Auto-Sweep | Conservative | Moderate | Aggressive |
| Constituents | 35% Fullerton SGD Cash Fund
25% LionGlobal SGD Enhanced Liquidity Fund
25% United SGD Money Market Fund
15% Cash |
|
|
|
| 3-year Annualised Return | 1.7% | 1.9% | 1.5% | 1.2% |
| 3-year Annualised Volatility | 0.1% | 0.3% | 0.5% | 0.8% |
| Return / Volatility | 17.0 | 5.7 | 2.8 | 1.4 |
| Max Drawdown (past 3 years) | N/A | -0.8% | -1.9% | -3.8% |
| Indicative Net Yield in SGD* | 3.238% (as of 13 Feb) | 3.91% | 3.88% | 4.15% |
| Average Duration (years) | 0.2 | 0.4 | 0.6 | 0.9 |
| Time required to use funds | Immediate for
investments T+1 for redemptions |
Fullerton: T+1 Nikko: T+2 |
Fullerton: T+1 Nikko: T+2 United: T+4 |
Fullerton: T+1 Nikko: T+2 United: T+4 LionGlobal: T+4 |
| Source:
iFAST compilations. Data as of latest available factsheets / data from
fundhouses. *Inclusive of fund-level fees (e.g. expense ratio), but excludes platform fee. **Fullerton only provides an average maturity for their fund which we use for our duration calculation (will slightly overestimate duration). |
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Table 4: Model USD cash management portfolios
| Risk Profile | USD Auto-Sweep** | Conservative | Moderate | Aggressive |
| Constituents | 90% iFAST USD Enhanced Liquidity Fund
10% Cash |
|
|
|
| 3-year Annualised Return | N/A (Portfolio launched on 3rd July 2023) | 2.1% | 1.8% | 1.2% |
| 3-year Annualised Volatility | N/A (Portfolio launched on 3rd July 2023) | 0.4% | 0.6% | 0.8% |
| Return / Volatility | - | 5.3 | 2.9 | 1.6 |
| Max Drawdown (past 3 years) | N/A | -0.9% | -2.0% | -2.1% |
| Indicative Net Yield in USD* | 4.694% (as of 13 Feb) | 5.26% | 5.35% | 5.47% |
| Average Duration (years) | 0.3 | 0.4 | 0.6 | 0.6 |
| Time required to use funds | Immediate for
investments T+0 for redemptions |
Fullerton: T+1 Nikko: T+4 |
Fullerton: T+1 Nikko: T+4 United: T+4 |
Fullerton: T+1 Nikko: T+4 United: T+4 HSBC: T+4 |
| Source:
iFAST compilations. Data as of latest available factsheets / data from
fundhouses. *Inclusive of fund-level fees (e.g. expense ratio), but excludes platform fee. For funds with SGD base share class, we assume about a 1.7% hedge benefit for the USD-H share class based on latest overnight rate differentials. **USD Auto-Sweep was only recently incepted and does not have 3 years of historical data. |
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Final thoughts
Overall, our Auto-Sweep facilities and model DIY cash management portfolios continue to provide competitive yields compared to traditional cash parking facilities like bank fixed deposits (Charts 1 and 2). Both the Auto-Sweep and model portfolios come with (significantly) higher liquidity and no early withdrawal penalties compared to fixed deposits as well.
Overall, our Auto-Sweep facilities stand out for their extremely high liquidity, attractive yields, and low levels of risk. Investors who do not require same-day liquidity for investments and are chasing slightly higher yields can also consider DIYing their own cash management portfolios on our platforms.
Chart 1: SGD Auto-Sweep and model portfolios offer yield pickups over traditional alternatives
Chart 2: USD Auto-Sweep and model portfolios offer yield pickups over traditional alternatives
Declaration:
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