
Ever since I wrote My Guide to the CPF Investment Scheme (CPFIS) last year, there has been a new product introduced to the CPFIS universe – Endowus received approval to become the first digital financial advisory firm to be approved to offer its services for CPFIS.
This caught my attention as Endowus was one of 2 digital financial advisors offering Dimensional Funds to customers. Intrigued, I took a look under the hood and here’s my review.
Disclosure: This is written in collaboration with Endowus, with the only concession given being a lower minimum investment amount of $5,000, instead of $10,000 normally. I also get $10,000 advised for free for 6 months (equivalent to about $20) for each sign-up via my referral link.
Other than the minor benefits above, this is not a paid promotion. The views presented are my own.
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Table of Contents
Introduction

Endowus is a digital financial advisory firm that offers access to actively managed funds / unit trust at a comparatively lower cost to traditional financial advisors through the use of technology.
Their investment philosophy is described as an evidence-based approach. What this means is that investment portfolios are developed based on a set of factors that academic research has proven to drive out-performance historically.
This approach is evident from the use of Modern Portfolio Theory for portfolio construction and asset allocation, and the use of funds with an evidence based investing philosophy like Dimensional Funds.
What is Evidence based Investing?
Kyith from InvestmentMoats has written extensively about Evidence based Investing and Dimensional Funds here. It’s a really, really long but informative article that I strong encourage you to read. If you don’t have time, I’ll try to dumb it down here.
To illustrate an evidence based investing approach, let’s take a look at some of the common investment adages in the market:
- Buy stocks only when they are cheap (Low Price to Earnings, Low Price to Book)
- Always minimise the cost of your investments (Brokerage fees, management fees, etc)
- Always invest in Quality management
To the average investor, all these sayings and words of wisdom makes sense at first glance.
What evidence based investors do is to look for academic research / evidence showing the historical usefulness of these factors in building investment portfolios. Factors that are useful, you incorporate in your portfolio model. On the flipside, factors that prove to be irrelevant are disregarded.
This constant research and refinement of models are essentially what evidence based investors and fund managers do.
What is Dimensional Fund Advisors?
Dimensional Funds were early adopters of the evidence based investing approach. The origins of Dimensional Funds mentioned in the InvestmentMoats article:
DFA was founded in 1981 by David Booth and Rex Sinquefield. Both Rex and David was graduates of University of Chicago’s School of Business, which is now renamed as Booth School of Business, after David Booth.
When they started the firm in 1981, they decided that their philosophy towards portfolio strategy, and structure should be based on evidence research. Back then in 1981, it was based on the single factor, which is that small cap out performed large cap issues.
Then in 1992, Eugene Fama and Kenneth French published the research on what is now known as the Fama-French Three Factor Model, DFA launched funds based on this framework.
Since then DFA have continued to based their investment philosophy on research, and evidence based investing.
They brought on both Eugene Fama and Kenneth French as directors, but also Nobel Laureate Myron Scholes and Robert Merton (who became famous for their Black Scholes options pricing model and as part of the founders of the infamous Long Term Capital Management), Yale professor Roger Ibbotson.
By investing with Dimensional Funds, you are effectively choosing to invest with an evidence-based approach.
Meet the Funds
Depending on whether you are investing with Cash / SRS or CPF Ordinary Account funds, you will have access to different funds. Based on my understanding, this is due to funds used for Cash / SRS investments not being on the CPF Approved Funds list.
Based on my conversations with Endowus, the aim is to get those funds approved for the CPF Approved Funds list in the near future.
Common Features
I observe there are 2 common features of the funds recommended by Endowus.
Firstly, the funds available are UCITS funds. These are funds that are supposedly structured in a tax efficient manner to reduce costs. To learn move about UCITS and its benefits, refer to the same article by InvestmentMoats.
The other common feature of most of the funds is that they are Accumulating funds. This means that the funds do not pay a dividend and retain any dividends the funds receive for reinvestment. Depending on your investment objectives, this can be a good or bad thing. To me, it doesn’t really matter.
The only exception is First State Dividend Advantage Fund, which is a distributing fund. The distributions of this fund will credited to your CPF OA when distributed.
Update 16 Jan 20: I’ve received an update from Endowus that distributions are now auto reinvested. As such, all funds are accumulating in nature.
Cash / SRS Investments
Note: Cash and SRS Investment fund options do not charge a trailer fee. I was also unable to find the turnover ratio for the Cash / SRS Investment funds.

Dimensional World Equity Fund (DWEF)
Fund type: Equities
ISIN: IE00BF20L762
Investment focus: Global equities
Expense Ratio: 0.43%
Resources: Fund Documents

PIMCO GIS Global Bond Fund (PIMCO1)
Fund type: Fixed Income / Bonds
ISIN: IE00B3Q8VQ13
Investment focus: Global Bonds
Expense Ratio: 0.49%
Resources: Fund Documents

PIMCO Global Real Return Fund (PIMCO2)
Fund type: Fixed Income / Bonds
ISIN: IE00B29WLV81
Investment focus: Global Inflation-linked Bonds
Expense Ratio: 0.49%
Resources: Fund Documents

PIMCO GIS Emerging Markets Bond Fund (PIMCO3)
Fund type: Fixed Income / Bonds
ISIN: IE00BG88PX59
Investment focus: Emerging Market Bonds
Expense Ratio: 0.79%
Resources: Fund Documents
CPF OA Investments
Note: CPF OA Investment fund options charge a trailer fee. Expense ratio shown below is before trailer fee rebates.
Updated 23 April 2020 – Swapped Harris Associate fund for Infinity Global Equity Index Fund

Lion Global Infinity US 500 Stock Index Fund (US500)
Fund type: Equities
ISIN: SG9999003289
Investment focus: Feeder fund into Vanguard US 500 Stock Index Fund
Expense Ratio: 0.68%
Turnover Ratio: 23% (Dec 2018)
Resources: Fund Documents

Lion Global Infinity Global Equity Index Fund (IGS)
Fund type: Equities
ISIN: SG9999003321
Investment focus: Global equities
Expense Ratio: 0.735%
Resources: Fund Documents

First State Dividend Advantage Fund (FSDA)
Fund type: Equities
ISIN: SG9999002083
Investment focus: Asia ex-Japan equities
Expense Ratio: 1.71%
Turnover Ratio: 13.1% (Dec 2018)
Resources: Fund Documents

Schroders Global Emerging Market Opps Fund
Fund type: Equities
ISIN: SG9999006852
Investment focus: Emerging market equities
Expense Ratio: 1.68%
Turnover Ratio: 4.05% (Dec 2018)
Resources: Fund Documents

Eastspring Singapore Select Bond Fund
Fund type: Fixed Income / Bonds
ISIN: SG9999006852
Investment focus: SGD denominated / Forex bonds hedged to SGD
Expense Ratio: 0.62%
Turnover Ratio: 17.9% (Dec 2018)
Resources: Fund Documents

Legg Mason Western Asset Global Bond Fund
Fund type: Fixed Income / Bonds
ISIN: SG9999005193
Investment focus: Global bonds in SG or G10 countries
Expense Ratio: 0.87%
Turnover Ratio: 42.32%
Resources: Fund Documents

United SGD Fund
Fund type: Money Market Fund
ISIN: SG9999001382
Investment focus: SGD Short term bonds / Bank Deposits
Expense Ratio: 0.67%
Resources: Fund Documents
Model Portfolios
Based on your stated risk tolerance level (based on how much potential losses you are willing to stomach), Endowus recommends a mix of equity and bond funds from the above funds.
Naturally, if you have a higher stated risk tolerance, the larger the proportion of equity funds in your proposed portfolio.
Here are tables of the possible compositions of the recommended portfolios.

Cost

Managing your cost is a big determinant of your returns over time. As such, adopting a low cost structure in investing is just as important as choosing the right instrument to invest in.
There are 2 types of cost associated with this investment – an Access Fee paid to Endowus and the Expense ratio paid to the respective fund managers.
Access Fee

Endowus adopts a single all-in access fee based on assets under advice ranging from 0.25 – 0.60% for Cash investments and 0.40% for CPF / SRS Investments. Other than fund expenses, there are no transaction fees, sales charge and other hidden fees involved.
This is how Endowus makes money.
Expense ratio
Expense ratio is represents the operating costs for running the funds. This include staff salaries, utilities, office rent, management fees and trailer fees, among other expenses. These expenses are deducted from your investment value at the fund level. As such, it is important to choose funds that have low fees.
To reduce the funds’ running cost further, Endowus has committed to rebate all trailer fees to you.
Trailer fees are essentially recurring commissions that advisors are entitled to from the funds you invested in. Advisors are entitled to these fees as long as you stay invested in those funds. This is partly why unit trusts have such high expense ratios (ie high operating costs).
This theoretically gives you access to these funds at a lower cost than through other channels.
To illustrate, here are summary tables of total all in cost for each model portfolio and each fund.


Onboarding and Platform
For the purposes of my review, I went through the onboarding process to understand the process and time taken to open and account. It also allowed me to look through the platform to see if i missed out anything.
Onboarding Experience

The onboarding process was relatively simple. After creating an account and verifying your email, you will be required to fill out a questionnaire above to understand your goals and risk tolerance. Based on your risk tolerance, they will recommend a model portfolio for your purposes.
The application process was smooth and fuss free. The only part that took some time of digging around for the required documentation and account numbers.
Then came the approval process. It was mentioned in an email that it takes 3-5 business days to get approval. Unfortunately for me, emails from Endowus sent on day 1 and 3 requesting for further information were filtered by Google into Promotions emails, which I don’t regularly read. As such, it took me some 8 business days in total to open my account as I had to follow up with them on the account opening.
Long story short, check your junk / promotions emails if you apply haha.
Platform

The platform is quite clean and functional. You can set up single investments and recurring investments. There are pages for investment performance and transaction balances. However, as I don’t have any transactions at the moment, showing those screens are not useful.
I was a bit disappointed by a lack of an app, but the web interface of the platform seems functional.
My thoughts
I’ll provide my thoughts from the perspective of a very aggressive investor (100% equity funds).
On funds available for investment
For Cash and SRS investments, the use of Dimensional funds is something I’m interested in investing as an experiment due to their purported evidence based investing approach with expense ratios. The bond funds seem decent as well, as mixing in some bond funds did not severely reduce the historical returns. Those more conservative can choose to invest in those more conservative model portfolios.
For CPF investments, most of the equity funds selected have relatively high expense ratio funds (>1.5% funds). That said, the model portfolios do not assign high weightage to those funds, thus reducing cost. It also offers a unique opportunity to invest in the Vanguard S&P 500 index fund via the Lion Global US Infinity US 500 fund, something unavailable to CPF investors via other platforms.
I would love to try investing in Dimensional funds using CPF in the future, though that is currently unavailable.
On all-in cost of investing
Across the board, the all in cost of investing at the maximum of 1.18%. SRS investments are particularly attractive as they are generally below 1%.
While 1.18% is not particularly attractive compared to index funds or Vanguard funds, you are paying for a manager to help pick the stocks for you compared to those passive funds. The cost difference is more evident should you choose to buy the funds individually from more traditional advisors.
I also like that the funds that disclose turnover ratios have seem to have low ratios (<40%). Low turnover ratios imply lower trading costs (as you don’t change your portfolio too much) and a potential longer term focus.
That said, I can’t comment if this cost is the lowest possible when compared to more direct competitors like MoneyOwl or simply buying individual funds from FSMOne without further research.
On trust worthiness of the advisor
One concern most people will have about financial advisors is that whether they are trustworthy / stable or not. You don’t want to find yourself investing with somebody that goes bankrupt or runs away with your money the next day.
In that regard, I can’t really say, as Endowus is still a relatively young company. 2 things to note though:
Firstly, the company is licensed by MAS. Secondly, your funds and holdings will be held in a trust account managed by UOB Kay Hian. As such, should Endowus ever close down, your holdings are safely handled by a third party.
On whether it is worth investing

If you are somebody who doesn’t like to make investment decisions, don’t really want to deal with financial advisors and want to invest regularly for the long term, Endowus might be a good option for you.
I emphasize on long term as investing due to the diagram above. It shows that based on the MSCI World Index, the longer your holding period, the lower your investment volatiliy / worst return.
Personally, as somebody who would like to make my own investment decisions and tactical bets, I would not invest using my cash or SRS, except for experimental purposes.
However, for the CPF product, it might be worth experimenting with. This is because this is classified as a Professionally Managed Product and there are looser caps on the amount of CPF I can use for such investments. As such, it allows me to potentially boost the returns on monies currently idly earning only 2.5% interest.
Starting my regular CPF Investment


With that in mind, I’ve started a $5,000 initial CPF OA investment with a 100% equity fund allocation. I’ve also set up a $500 regular top up that occurs a couple of days after my monthly pay day.
This may look like a dumb move now, thanks to the recent surge in the S&P 500 in December going into year end. However, I’m a firm believer in letting my money spend more time in the market, rather than timing the market. So here I am, putting money where my mouth is.
Going forward, my monthly portfolio reviews will encompass my CPF investment with Endowus, for your reference.
If Endowus sounds like something you’ll be interested in investing with, here’s my referral link for sign ups. We will both get $10,000 advised for free for 6 months, worth about $20.
I thank the Endowus team for supporting this review.
Happy Hunting,
KK
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