Earn+ is a cash management strategy that seeks to provide consistent returns* by investing in short-term, fixed income markets through actively managed funds denominated in Singapore Dollar.
Earn+ investment strategy
We may use a range of fixed income strategies for Earn+. In order of risk and return, these are:
1. Money Market funds
These funds are highly stable since they invest in very low-risk, highly liquid instruments such as cash, cash equivalents and high-quality short-term debt securities with a residual maturity typically not exceeding 1 year.
In 2020 and 2021, a typical Money Market fund returned 0.1% – 0.8% per annum and had a maximum drawdown of less than 0.1%.
2. Short-term bond funds
These funds focus on investment-grade corporate bonds and also hold government bonds. The average maturity of the portfolios is usually below 3 years.
In 2020 and 2021, a typical short-term fixed income fund returned 0.3% – 3.2% per annum and had a maximum drawdown of up to 2%.
3. Bond funds
These funds do not have maturity limitations for their investment portfolios. Primarily relevant for Earn+ are funds that focus on investment-grade rated corporate bonds. A small portion of high-yield bonds may be considered if they help to diversify the portfolio. Given the wider array of focus for bond funds, the range of returns is a lot wider and depends on the fund objective. Expected returns are higher than returns on short-term bond funds, but drawdown risk is also higher.
It’s unlikely that Earn+ will use all of the strategies at the same time, but will focus on those that are most relevant to achieve the risk objectives. The portfolio does not seek exposure to equity securities or commodities. To align with the primary objective of low volatility and low drawdowns, we select funds that focus on instruments with shorter maturity ranges.
Earn+’s primary objective is to maintain a low price volatility of around 1% as measured by the annualised standard deviation. By comparison, in 2020-2021 the Straits Times Index, Singapore’s main equity gauge had a standard deviation of up to 24%, while the ABF Singapore Bond Index, which focuses on SGD bonds issued by the Singapore Government or Singapore Government-linked entities without maturity limitation, had a standard deviation of up to 7%.
With its investment objective, the Earn+ portfolio will invest primarily in Singapore government bonds, bank deposits and investment-grade corporate bonds. This risk objective enables the portfolio to achieve returns that are significantly higher than standard fixed deposits offered by banks to retail investors.
We’ll review the return expectations of the portfolio for the next 6 months on an ongoing basis, and keep investors up to date with an estimate of what is achievable in the current market environment. The principal is not guaranteed and actual returns can vary from month to month and differ from the projection.
We have selected the Fullerton Short Term Interest Rate Fund and the United SGD Bond Fund as part of the initial portfolio. These funds have a very long operating history which helps us understand their performance. The portfolio can also hold other funds with similar characteristics. Here’s an overview of the actual performance of the two funds for the last 10 years¹, on a yearly basis.
Learn more about the two funds here.
* Projected yield and returns are not guaranteed or protected. Please refer to our latest projected yield and returns.
¹ Past performance is not indicative of future results.
