A smarter way to manage your cash
Updated July 2024
Amidst lingering high interest rates worldwide, scores of investors have gravitated towards cash for its stable and attractive yields.
In response to the needs of Singaporean savers seeking greater agility in managing their cash reserves, Fullerton pioneered an innovative SGD liquidity strategy in the past 12 months designed to offer investors same-day liquidity to their capital. This effectively enhances the allure of cash funds by increasing their liquidity and convenience.
Typical objectives of a well-managed cash fund
Note: For illustration purposes only.
1) Provide competitive returns to bank deposits
Cash funds are actively managed by investment managers who wield an expansive insight into various banks and market dynamics. These dedicated professionals diligently scrutinise macroeconomic indicators, track interest rate trends and evaluate counterparties. Their expertise allows them to prudently spread their placements across financial institutions, invest in government bills, and dynamically finetune the duration of their placements. This strategic approach aims to optimise both returns and liquidity, all while astutely managing counterparty risks.
2) Preserve capital
Cash funds are strategically allocated across diversified financial institutions and government-related issuers, a tactic that can potentially curtail risk, dampen volatility, and cultivate potential higher yields in contrast to single deposits.
The Monetary Authority of Singapore’s Code on Collective Investment Schemes prescribes that assets are committed only to financial institutions that boast short-term ratings no lower than F-2 by Fitch, P-2 by Moody’s, or A-2 by S&P’s (i.e. investment grade), or their equivalents as recognised by the investment managers. This guideline serves to further mitigate the uncertainty associated with counterparty risks.
3) Ready access to your capital
Cash funds are designed typically to offer same or next business day settlement during redemptions. The swift access to their capital allows investors to efficiently manage unforeseen expenses or reserve funds for potential investment activities. Such flexibility is made possible as investment managers deftly manage the maturity timelines of the invested deposits. They may also judiciously intersperse the portfolios with carefully chosen government bills, ensuring a steady state of liquidity.
Moreover, adding cash funds to an investment portfolio is now remarkably easy, thanks to the availability of investment platforms offered by established banks, digital brokerages, or intuitive robo-adviser services, some without the burden of a minimum investment threshold. Optimally managed cash funds can boast the bonus of competitive management fees1 - some as low as 0.16% per annum - and with 0% subscription charge. This combination makes it a cost-effective option for investors who wish to add bank deposits and some government bills to diversify their investment portfolios.
Interest rate outlook2
As we navigate through the mid-2024 landscape, a patchwork of central bank policies has emerged unevenly. The Swiss National Bank was the first major developed market central bank to cut policy rate in 2024, with Canada, Brazil and the ECB echoing the easing. Contrasting, the Bank of Japan has seized the moment to nudge its short-term interest rate higher – a sentiment shared by its counterparts in Taiwan and Indonesia. The US Fed, however, remains in a contemplative phase, weighing the timing of its first cut. Market anticipation hints at a gradual policy relaxation, in the wake of stubbornly heightened inflation data and elevated payrolls.
Looking to Singapore, the Monetary Authority of Singapore’s Policy Statement has held steady on its restrictive stance, keeping the SGD Nominal Effective Exchange Rate (S$NEER) on a moderate incline to temper both imported inflation as well as domestic cost pressures. Meanwhile, Q1 GDP came in above expectations, recording a healthy 2.7% year-on-year growth, while also painting a cautiously optimistic global economic outlook3. This narrative for Singapore, alongside the elevated US Fed Fund rates, portends well for the resilience of cash and short-duration strategies, and for cash investors to continue achieving the potentially sustained yield levels they currently enjoy.
1For illustrative purpose only
2As of July 2024. Views are subject to change without notice.
3Source: Ministry of Trade and Industry Singapore, as of May 2024.
In a nutshell: Potential benefits of investing in cash funds
Achieve potentially better rate discoveries and liquidity
Actively managed by investment professionals
Same or next business day settlement
Diversified across financial institutions
Competitive fees
Learn more about Fullerton's SGD cash solutions
Disclaimer
No offer or invitation is considered to be made if such offer is not authorised or permitted. This is not the basis for any contract to deal in any security or instrument, or for Fullerton Fund Management Company Ltd (UEN: 200312672W) (“Fullerton”) or its affiliates to enter into or arrange any type of transaction. Any investments made are not obligations of, deposits in, or guaranteed by Fullerton. The information contained herein has been obtained from sources believed to be reliable but has not been independently verified, although Fullerton believes it to be fair and not misleading. Such information is solely indicative and may be subject to modification from time to time. The contents herein may be amended without notice. Fullerton, its affiliates and their directors and employees, do not accept any liability from the use of this publication.