We understand that you might be concerned about the recent headlines about the financial crisis at Silicon Valley Bank (SVB).
We would like to reassure you that neither StashAway nor the security of your funds have been impacted by this incident. In other words, your funds and StashAway's funds are not held by SVB.
Instead, StashAway’s banking partners DBS, HSBC, and Citibank hold your funds and securities in custodial accounts. Our own company funds are held at DBS and Citibank and are segregated from our clients' funds. These banking partners are among the world’s leading banking institutions, with HSBC and CitiGroup as part of the Global Systemically Important banks (G-SIBs).
SVB crisis originates from the combination of a concentrated deposit base and a maturity mismatch between the banks’ deposits (readily available for clients’ withdrawals), and a large portfolio of 10 year treasuries whose value has been affected by the last 9 months' interest rate hikes (remember, when yields rise, the price of bonds drop).
The crisis was the definition of a “bank run”: Depositors heard rumors of issues at the bank and started withdrawing their deposits, forcing the bank to sell their treasuries and booking losses, thus triggering a vicious circle. On Sunday night, US financial regulators announced that they will protect depositors’ funds by setting up a new financial backstop, seeking to stem fears that households and businesses would flee other small banks. For more in-depth information on the incident, CNBC has covered it here.
StashAway’s portfolios don’t have any direct exposure to SVB. Given that SVB is part of US and global indexes such as the S&P 500, our portfolios have an insignificant exposure to SVB equity and bonds. To put that exposure into context, our highest-risk portfolio with a StashAway Risk Index of 36 (SRI 36), has a maximum exposure of 0.0062% via broad market ETFs such as IVV, ISAC, and AGG. In our last reoptimisation, ERAA® under-weighted US financials in its portfolios, as the sector has historically underperformed in rising interest rate environments and is sensitive to any economic slowdown.
We stay at your disposal for any clarification and stay committed to bringing you the best and most secure investment solutions. Thank you for choosing StashAway as your investment partner.