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Difficulty Level: Easy

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Endowus recently launched Endowus Fund Smart, a new product offering that allows investors to customize portfolios from a curated list of unit trusts. This product is targeted at DIY-type investors, who can leverage on Endowus’ analytical tools to conduct a holistic review of the customized portfolio’s risk, returns and cost-efficiency prior to investing and for portfolio monitoring purposes. 

Such features are the first of its kind in Singapore, so here’s our take! 

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Summary

1) Grunt work’s already done

The hard part of DIY investing is the lack of tools to conduct fund research. Endowus Fund Smart has analysts that do this for you, so that you can concentrate on the most important part of investing – selecting the sectors and markets you’re bullish on.

2) Access to a category of lower fees

You’ll qualify for the “institutional share class” for several unit trusts on the platform, which offers fees as much as 80% lower than the “retail share class”. In addition, Endowus rebates to you all recurring commission fees it receives from the fund house.

3) Offers substantial diversification

Minimum sums for the “retail share class” range from S$1K to S$5K while those for the “institutional share class” usually range in the millions. In comparison, Endowus Fund Smart allows you to participate in a basket of up to 8 funds at a minimum of just S$100 per fund.

4) Implements automatic rebalancing

You may opt to automatically rebalance your portfolio back to the preferred target allocation, when there is a significant deviation due to market movements.

5) Simulates portfolio returns

Tweak the allocations of your chosen unit trusts to understand and achieve your most desirable risk-return profile.

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Best Unit Trust Platform + Promo Code

In our previous review of Endowus, we had already been impressed by their product offering compared to peers, in consideration of their investment process, cost-efficiency and risk management. They’ve leveled up their platform even more with their latest product offering – Endowus Fund Smart. 

Endowus Fund Smart provides a DIY investment option via a curated list of unit trusts and offers benefits normally only available to Private Bank clients or Institutional Investors. As a result, you can simply focus on the most crucial part of fund management – deciding exactly where you want to invest your money.  

If you are keen to try out the Endowus platform, Endowus has given our readers a promo code that entitles you to have S$10,000 managed for free for 6 months ($20 equivalent). 

Click Here For Promo Code

In the following sections, we run through the reasons on why we believe Endowus offers the most compelling unit trust platform now.

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1) Grunt Work’s Already Done!

Analysts pick the best funds to execute your market view

Curated list of unit trusts

The hard part of DIY investing is the lack of tools to conduct fund research. Institutional investors usually conduct extensive research, using tools such as Morningstar and Bloomberg databases to select the best unit trusts to invest in. Attempting to undergo the same level of due diligence is not possible/practical for the typical retail client. 

For Endowus Fund Smart, the list of available unit trusts has already been curated by the Endowus Investment Office, which is headed by Samuel Rhee, the former CEO and CIO at Morgan Stanley Investment Management in Asia. The selection criteria for these unit trusts includes screening for the fund size, fund cost, investment experience and performance against benchmark.  

Endowus Fund Smart’s curated list of unit trusts allows DIY investors to concentrate on the most important part of investing – selecting the sectors and markets you’re bullish on.

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2) Access to a Category of Lower Fees

Access to best unit trust share class

Endowus Fund Smart offers lower fees because of two distinct features that set it apart from traditional unit trust platforms.

Access to the “Institutional Share Class” for several unit trusts

Several unit trusts are available to Endowus Fund Smart clients at the “institutional share class”, which is typically only available to institutional investors who invest in the millions.

Fees are significantly lower for the “institutional share class” versus the “retail share class”, despite both share classes holding exactly the same investment portfolio. Note that traditional fund distributors like Fundsupermart or Dollardex and even Private Banks only provide access to the “retail share class”.

Fees for “Institutional Share Class” vs “Retail Share Class”

The chart below shows some of the unit trusts for which Endowus Fund Smart offers the “institutional share class”. We note that several of these unit trusts are particularly popular amongst Singapore investors – for instance, LionGlobal Short Duration Bond Fund, Pimco Global Investment Grade Credit Fund, and Pimco Income Fund.

For these unit trusts, we’ve compared the Total Expense Ratio for the “institutional share class” (as offered by Endowus Fund Smart) and the “retail share class” (offered by other platforms).

The median difference in the Total Expense Ratio is 0.9%! Aside from this list, Endowus Fund Smart does offer the “institutional share class” for eight other unit trusts, but they don’t have a “retail share class” available so it wasn’t meaningful for comparing Total Expense Ratios.  

Endowus Fund Smart rebates you for any “trailers” they receive!

In addition, Endowus rebates you on any recurring commission fees received from the fund managers – for ALL the unit trusts on the Endowus Fund Smart platform (aside from those it doesn’t receive commissions from). In finance-speak, these commission fees are known as trailer fees. 

From our own experience, trailer fees are significant! They typically range from 20% to 40% of the Total Expense Ratio. As far as we know, Endowus is the only robo-advisor in Singapore that rebates trailer fees! Financial advisors, banks and traditional fund distributors like Fundsupermart, DollarDex, and POEMS do not rebate their trailer fees.  

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3) Offers Substantial Diversification

A S$100 minimum investment amount per unit trust

Endowus offers the lowest minimum investment amount

Endowus Fund Smart has a minimum investment amount of S$100 per portfolio investment, which allows DIY investors to diversify as if they have a large AUM. As mentioned previously, Endowus Fund Smart offers the “institutional share class” (lower fees) where it can, and “retail share class” for the rest – the minimum of S$100 applies to both.

Meanwhile, traditional fund distributors (e.g. Fundsupermart, DollarDex, POEMS) usually require a minimum investment amount of S$1K to S$5K per unit trust. This minimum investment amount – for a “retail share class”, is tied to the specific unit trust and tends to be standard across all the traditional fund distributors.

For Private Bank clients, the minimum investment amount typically ranges from S$50-100K – for a “retail share class”. This minimum tends not to be a strict requirement, but most relationship managers will recommend that amount as a starting point. 

While direct investment by institutional clients typically means better fees (via the “institutional share class”), the minimums typically range in the millions!

Min investment amt & share class for specific unit trusts

Below we’ve picked six popular unit trusts offered on the Endowus Fund Smart platform. We’ve highlighted the minimum investment amounts required on Endowus vs. other types of platforms, as well as listed the share class available for each unit trust on that platform. Remember that the “institutional share class” always offers lower fees than the “retail share class”.

Endowus Fund Smart offers best of both worlds

In this sense, Endowus Fund Smart offers the best of both worlds – access to the lowest fees possible while maintaining very small bite sizes. Do note that while the minimum bite size for Endowus Fund Smart is S$100 per unit trust, the total amount you must have invested with Endowus across all its various products (e.g. Endowus Cash Smart, Endowus Model Portfolios and Endowus Fund Smart) must still be S$1K and above.

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4) Implements Dynamic Rebalancing

Only available to Private Bank Clients & Institutional Investors

Why rebalancing is important

Rebalancing is important because of two reasons. First, it brings your portfolio risk back to where you had intended it to be. Second, it gives you the opportunity to skim the profits on your profitable positions to reinvest into cheaper segments of the market that have not performed as well (i.e. buy low, sell high). Forbes recently published an article that advises the use of a disciplined approach to portfolio rebalancing, rather than trying to time the market.

Investing via Endowus Fund Smart will give you timely insights on possible periods when you should be rebalancing. If an underlying unit trust drifts by more than 15% from its target allocation (i.e. a unit trust with a target allocation of 20% moves by +/-3%), Endowus will send an email to inform you. If you choose to go ahead with the rebalancing, they’ll implement it for you upon your confirmation.

Such rebalancing is typically only available to Private Bank clients and Institutional Investors. Rebalancing for Private Bank clients tends to be on an adhoc basis, while that for Institutional Investors usually relies on a portfolio management team.

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5) Simulates Portfolio Returns

Not typically available, even for Private Bank clients

Portfolio simulation is particularly useful for DIY investors

For DIY investors who are selecting their own portfolio of unit trusts, portfolio risk-return simulation is particularly useful.

Firstly, it quantifies risks and return prior to investing. This gives the investor some insight on the extent of losses to reasonably expect during a bad market for a chosen portfolio of funds. If deemed too risky, the investor may tweak his fund allocations to achieve a more desirable profile. In addition, having a quantified return projection is also be useful in establishing a level of confidence, for investors hoping to achieve certain financial goals within a specified timeframe.

Secondly, the portfolio simulation tool allows a portfolio of unit trusts to be viewed holistically, factoring in the diversification benefits that may be achieved to derive higher returns at lower risk. An investor is able to simulate if it makes sense to add more to a chosen unit trust or to introduce an additional unit trust to the portfolio.

Yet, it is typically only available to Institutional Investors

Building a portfolio simulation tool for customizable portfolios is complex. It requires access to data and a proprietary algorithm. This is typically out of reach for most individual investors, even for those who are fortunate enough to have a Private Banking relationship.

The exception? Endowus Fund Smart

Endowus Fund Smart runs 1,000 simulations for your portfolio, in order to present to you a range of potential portfolio returns under various scenarios.

In the below image, we show what you can expect to get out of Endowus Fund Smart’s portfolio simulation. You will receive information on your selected portfolio such as:

• Historical Worst to Best 1 Year Returns
• Historical Average Annual Return
• Net fees
• Projected Median Return
• Projected Return in an Optimistic Scenario (top 25% percentile of projected returns)
• Projected Return in a Pessimistic Scenario (bottom 25% percentile of projected returns)
• Probability of Underperforming 2.5% p.a.

In addition, Endowus Fund Smart will also guide users on whether the risk of their chosen portfolio is aligned with their preferred risk tolerance indicated during the “goal creation stage” of account set up. This ensures that DIY investors will still be able to benefit from Endowus’ risk management oversight. We have included some sample screen shots below to show how this will work in practice.

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Best Unit Trust Platform + Promo Code

In our previous review of Endowus, we had already been impressed by their product offering compared to peers, in consideration of their investment process, cost-efficiency and risk management. They’ve leveled up their platform even more with their latest product offering – Endowus Fund Smart. 

Endowus Fund Smart provides a DIY investment option via a curated list of unit trusts and offers benefits normally only available to Private Bank clients or Institutional Investors. As a result, you can simply focus on the most crucial part of fund management – deciding exactly where you want to invest your money.  

If you are keen to try out the Endowus platform, Endowus has given our readers a promo code that entitles you to have S$10,000 managed for free for 6 months ($20 equivalent). 

Click Here For Promo Code