08 July 2022
StashAway Simple™ is our cash management portfolio that lets investors earn stable returns with ultra-low risk.
We designed Simple to deliver the best possible returns at the lowest possible risk level. That’s how Simple has consistently delivered stable returns and hasn’t seen a single week of negative returns since inception.
Our investment team carefully monitors the economic climate and risk factors that affect Simple’s underlying funds. That’s why they’re updating Simple’s asset allocation to increase your projected return while still keeping all risk factors well under control.
As you may have seen with our recent updates to Simple’s projected rate, the current rate hike environment has benefited both the underlying funds, LionGlobal SGD Enhanced Liquidity I Acc (LGI ELF) and LionGlobal SGD Money Market Fund Class A (LGI MMF). However, LGI ELF has a higher yield than LGI MMF. So by having more exposure to ELF, you get a better yield for Simple.
LGI ELF’s higher yield comes with a longer duration (meaning it’s more sensitive to interest rate changes) and higher credit risk than LGI MMF as LGI ELF has more exposure to corporate bonds. So, does this mean you need to worry about higher risks? The short answer is: no. We did our due diligence on LGI ELF and based our decision on the following:
As the riskier bonds within ELF mature over time, fresh cash proceeds are used to purchase newer, better-quality bonds.
Our fund manager, Lion Global, has been committed to diversifying its holdings. As interest rates rise, it’s now sourcing yield from various other avenues.
Also, Lion Global has always kept enough cash buffer to ensure that the portfolio is liquid enough to take redemptions without having to sell bonds.
You may be wondering why we went with a split of 70-30 and not 80-20 or even 100-0. So far, both funds’ yields have increased at about the same pace as the US Federal Reserve raised rates in 2022. With a split of 80-20, we’d still have a projected rate of 1.5% p.a., but with additional risk involved. Hence, in terms of the risk-reward ratio, we believe that a 70-30 allocation is a sweet spot for now, and we’ll adjust it accordingly if the difference widens.
We always take a risk-first approach for Simple, and have made sure that it remains an ultra-low risk portfolio for your cash — great for your emergency fund, saving for upcoming expenses, or even dollar-cost averaging into your investments. As always, we’ll review the projected rate weekly, and will notify you if there is a change.