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This article was written in collaboration with Syfe.

But be rest assured that what we have expressed below is our independent opinion and we write with your interest in mind.

Article Summary

1. Introduction

2. What is Syfe?

3. The appeal of Syfe Cash+

4. Best use cases for Syfe Cash+

5. Syfe’s investment portfolios (REIT+, Equity100)

1) Introduction

Most financial advisors would advocate setting aside 6-12 months of wages as emergency savings. This can help** **to tide over rainy-day events like a job loss or an unexpected large expense.

For these savings, I do recall receiving a decent 2-3% p.a. interest rate from my bank accounts just a few years ago. Very often, it involved clearing a few criteria such as salary crediting, hitting a minimum credit card spend etc. Unfortunately, such days are long gone…

Today, on a realistic assumption that an individual diligently credits $2,000 of salary and spends $500 on the bank’s credit cards each month,** **there’s only three bank accounts that still offers at least 0.5% p.a. interest rate!

1. Maybank SaveUp Account: 1.03% p.a.

2. Bank of China Smartsaver: 0.70% p.a.

3. UOB One Account: 0.50% p.a.

In search of better alternatives, we run a monthly review of “The Best Savings and Fixed Deposit Alternatives in Singapore”.** **Our review spans across Insurance Savings Plans, Cash Management Accounts from brokers & robo-advisors, and short-term Endowments.

A new entrant to our list is Syfe Cash+, a cash management account that offers a projected return of 1.75% p.a., and it’s an extremely competitive offering in the market currently in our view. In this article, we look to highlight the pros and cons of this product, and discuss who it might be best suited for.

2) What is Syfe?

Syfe is a Singapore-based digital wealth management platform founded by Dhruv Arora, an ex-UBS banker who led the bank’s ETF efforts in Hong Kong. The firm’s current leadership team is made up of industry veterans, some of whom have held C-suite roles previously.

Syfe experienced phenomenal growth in 2020, with AUM increasing tenfold in the first nine months of 2020. We attribute this to two key factors:

1. Supportive market environment: More individuals had time to think about their personal finances whilst working from home.

2. Good product offering: Almost half of Syfe’s new clients were referred by existing clients, which suggests that overall user experience had been positive.

On the latter point, channel checks on Seedly Reviews offer confirmation. Syfe managed to score a very impressive 4.6/5.0 on user ratings. Many cited a positive onboarding experience and responsive customer support. We also noticed a number of compliments, relating to the advice provided by their wealth experts.

Syfe currently offers four product solutions, catering to investors with varying objectives. For today, we will focus on Syfe Cash+, a liquid Cash Management vehicle for individuals looking for an enhanced yield.

3) The appeal of Syfe Cash+

In selecting the best place to park emergency funds and savings, the most important factors to consider would include:

1. Attractive Returns: Competitive return rates with a preference that returns are guaranteed

2. Safety: Low risk to principal

3. Highly Liquid: Able to withdraw easily, with no penalties or lock-ups

4. No Restriction on Account Balances: A lower minimum account balance, and uncapped maximum account balance would be preferred for increased flexibility.

Based on these metrics, Syfe Cash+ does a good job overall and we summarize what’s most important to know:

• 1.75% p.a. projected returns

• No SDIC coverage but investment risk is very low

• No lock-up

• No withdrawal fees

• No minimum or maximum account balance restrictions

In the following section, we will run through some of these points in more detail, with a comparison with other cash management options in the market currently.

Attractive Returns: Syfe Cash+ has the highest projected return

We have compiled the highest yielding cash management solutions in the chart below, at varying account balances.

• Green lines denote “cash management accounts”

• Blue line denotes “insurance savings accounts that are open to new subscribers”

• Grey dotted lines denote “insurance savings accounts that are closed to new subscribers”.

While GIGANTIQ and Singtel Dash EasyEarn offer yields of 1.8% p.a., this rate is limited to the first $10k and $20k of savings respectively. Do also note that both of these insurance savings accounts are closed to new subscriptions.

As a result, a clear standout would be Syfe Cash+ at 1.75% p.a. (projected returns), especially for individuals who are thinking of setting aside large cash balances.

One reason why Syfe Cash+ is able to offer such competitive projected returns is because of its low all-in fees. Syfe Cash+ currently invests in three low-risk unit trusts (see table below), which have total expense ratios (TERs) of between 0.34-0.36% p.a.

1. If you were to invest in these funds yourself via a unit trust or bank platform, you would incur a higher TER on two of these unit trusts, as you would be investing in the “retail share class” (as opposed to the cheaper “institutional share classes” that Syfe has access to). All-in, you would be expected to incur a blended TER that is 0.15% p.a. higher.

2. In addition, you might also be charged recurring fund platform fees and/or upfront brokerage commissions. For instance, if you went through FSM, you would be charged an additional 0.20% p.a. platform fee.

3. For Syfe Cash+, not only is there no platform fee but Syfe goes the extra mile by providing a trailer fee rebate for its users. Trailer fees are what the fund house (LionGlobal) pays to the fund distributor (Syfe) and it can be quite significant. In this case, the trailer fees are 0.30% p.a., which is fully rebated to Syfe Cash+ users.

Source: Syfe, data as of 31 December 2020

This means that the all-in cost of Syfe Cash+’s portfolio’s is only 0.05% p.a. (0.35% TER minus 0.30% trailer fee rebate), the lowest among cash management accounts locally!

Safety: Not guaranteed by SDIC but the investment risk is very low

SDIC coverage only extends to bank deposits and insurance savings plans, and NOT to cash management accounts (i.e. Syfe Cash+, Stashaway Simple, Endowus Cash Smart, FSMOne Auto-sweep ect).

While the principal and projected returns are not guaranteed, the investment risk of Syfe Cash+ is very low, as it’s invested in the following low-risk fixed income funds.

1. 30% LionGlobal SGD Money Market Fund

2. 35% LionGlobal SGD Enhanced Liquidity Fund

3. 35% LionGlobal Short Duration Bond Fund

A fixed income portfolio is considered low-risk when it has both high credit quality and short duration. In the table below, we can see that the unit trusts being used for Syfe Cash+ fulfills both these criteria.

• Average credit ratings of the selected funds are between “BBB” to “A”, which are investment-grade ratings. We will delve deeper into what this means in a bit.

• Weighted portfolio duration is 1.12 years.

Source: Syfe, data as of 31 December 2020

To give some context on the credit quality of the Syfe Cash+ portfolio, we have included the S&P credit ratings of some sovereigns and companies in the below image.

Source: Bloomberg and IQ compilation, retrieved 21 February 2021.

Default rates for “BBB” and “A” rated bonds have been low historically, as we can see in the table below. Correspondingly, the funds in the Syfe Cash+ portfolio have not experienced any bond defaults since their inception.

Source: S&P, “Default, Transition, and Recovery: 2019 Annual Global Corporate Default And Rating Transition Study” published 29 Apr 2020

While bond defaults may not be a big concern, we do want to ensure that the mark-to-market fluctuations for Syfe Cash+ are not too extreme, as that would detract from its usefulness as a short-term cash management tool. To evaluate that, looking at past portfolio declines could be instructive, especially during big market selloffs like what happened in March 2020.

The worst drawdown for Syfe Cash+ was a 0.73% peak-to-trough decline. I would say that the drawdown was relatively shallow and recovery was fairly quick, hence Syfe Cash+ is still appropriate as a cash management tool for one’s emergency savings.

Good Liquidity: No restrictions on daily redemptions / no withdrawal fees / no lock-in

For insurance savings accounts, cash withdrawals can typically be done within the same day. However, the trade-off is that there might be fees imposed on withdrawals.

For cash management accounts like Syfe Cash+, there are no withdrawal fees and redemption requests can be made daily. However, cash proceeds are expected to be received only a few days later. This is because cash management accounts like Syfe Cash+ will have to sell off the underlying unit trusts that are used to generate the enhanced yield.

We have compiled the expected time for cash withdrawals and the withdrawals fees (if any) in the table below, across cash management accounts and insurance savings accounts (grey rows). The “expected withdrawal time” includes the time taken to sell any underlying funds, and the processing of the cash transfer to your bank account. Do note that unlike fixed deposits, there is no lock-in period for any of these options.

*Etiqa reserves the right to delay the payment of the withdrawal amount/surrender benefit for up to a period of 6 months from the date of the withdrawal/surrender request.

No Restriction on Account Balances

A periphery benefit of Syfe Cash+ is that there is no minimum account size and no maximum account limit. In contrast,** **many of the insurance savings accounts have account sizes that are more restrictive, and often come with tiered return rates such that only the first $10-20k enjoys an enhanced yield.

We have compiled the account size restrictions across the various cash management accounts and insurance savings accounts below:

4) Best use cases for Syfe Cash+

Overall, we do see Syfe Cash+ as a noteworthy cash management solution. To summarize, its features include:

• 1.75% p.a. projected returns

• No lock-up

• No withdrawal fees

• No SDIC coverage but investment risk is very low

• No minimum or maximum account balance restrictions

There are several scenarios where we see the account being particularly useful.

1. Cash that is not for immediate use (i.e. 6-mth emergency savings) – but** with a **requirement of no lock-in and preference for higher yields.

2. Cash that is in excess of what is able to earn high return rates using insurance savings accounts – which is anything over the first $10-20k for Singlife Account, GIGANTIQ and Singtel Dash EasyEarn (all of which are closed to new account openings).

3. Cash sweep account – for individuals with an intention to invest in Syfe’s investment portfolios over time. Syfe is rolling out an automated feature where you can schedule regular fund transfers from Cash+ to your other Syfe portfolios.

Note that Syfe Cash+ SHOULD NOT be used as a cash account for daily expenditure. Similar to other cash management accounts (i.e. Stashaway Simple, Endowus Cash Smart etc),** **cash cannot be withdrawn within the same day, so we should think of it as a complement to bank savings accounts.

5) Syfe’s investment portfolios (REIT+, Equity100)

Assuming you have built up a sizable cash pile in Syfe Cash+, you might next be considering investing some of it.

Using a robo-advisor to invest offers a few advantages, including instant diversification, possibility to invest globally, no brokerage fees and the ability to start investing with relatively small notional sizes.

For Syfe, two of their more popular portfolios are REIT+ and Equity100. We will run through them briefly.

1. REIT+ (Syfe’s S-REIT portfolio):

A portfolio that offers diversified Singapore REIT exposure. The historical** **dividend yield for the portfolio has been approximately 5%, and REIT+ users have a choice to have the dividends reinvested or to be distributed on a quarterly basis.

When I first came across this portfolio, two questions came to mind:

1. Wouldn’t it be better to just buy the individual REITs from my broker directly?

2. If I wanted diversified REIT exposure, can’t I just buy the SGX-listed REIT ETFs?

I thought it’d be apt to share some points that address them.

On the first point, the intention of the REIT+ portfolio is to provide diversified S-REIT exposure and convenience for the investor, as cost-efficiently as possible. Assuming you are planning to invest $20k across 20 REITs using your own broker, the brokerage fees are going to be expensive. In addition, it’s not going to be time-efficient to address a high number of corporate actions that come your way subsequently (i.e. election of dividends in cash or scrip, rights issues etc), especially given the small investment notional per REIT counter.

On the second point, Syfe REIT+ is actually meaningfully more cost-efficient than the SGX-listed REIT ETFs. The Syfe team did a good job clarifying this point in this article.

For more details on the REIT+ portfolio, feel free to check this webpage for more details.

2. Equity100 (Syfe’s all-equity portfolio):

A smart beta ETF portfolio that offers global stock exposure. Factor tilts are currently towards “Growth”, “Large Market Capitalization” and “Low Volatility”, and the portfolio is comprised of the following ETFs:

• Invesco QQQ ETF (QQQ)

• iShares Core S&P 500 UCITS ETF (CSPX)

• iShares Core S&P Mid Cap ETF (IJH)

• iShares S&P 600 Small Cap ETF (IJR)

• iShares MSCI EAFE ETF (EFA)

• iShares Core MSCI Emerging Markets ETF (IEMG)

Collectively, these ETFs provide exposure to over 1,500 companies in the US, developed market countries in Europe, Australia and Asia, and emerging market countries such as China, India and South Korea.

For more details on the Equity100 portfolio, feel free to check this webpage.

3. Core (to be launched in March 2021):

Syfe will also be launching a new series of Core portfolios in March 2021, with increased exposure to technology and Chinese stocks. So do keep a lookout for that!

The InvestQuest View:

We view Syfe Cash+ as one of the best cash management solutions in the market currently, and an appropriate vehicle to store one’s emergency savings. We like its relatively high projected return of 1.75% p.a., which is driven by Syfe’s willingness to keep all-in costs low. While the account is not guaranteed by SDIC, the investment risk is sufficiently low such that portfolio value fluctuations have been manageable historically. There is also no lock-in period, no withdrawal fees and no account size restrictions.

Syfe Promo Code “InvestQuest” – New Syfe customers will have their first S$30,000 managed free for 6 month. No management fees are charged on the Cash+ portfolio, but the discount will apply if you decide to subsequently invest in the other Syfe portfolios.