Guide to Choosing the Best Cash Management Account in Singapore

What are cash management accounts?

You might have heard of Moomoo Cash Plus, Tiger Vault or Webull Moneybull discussed amongst investors in recent months. 

More recently, MariBank also launched Mari Invest for customers of the digital bank in Singapore.

These are all cash management accounts that aim to provide higher potential returns compared to savings accounts, and greater flexibility compared to fixed deposits.

By putting your money in a cash management account, you will be investing in money market funds or bond funds. These professionally managed funds will put your cash in instruments such as bank deposits or short-term debt to earn higher interest rates. 

Cash management accounts are hence good candidates for parking your money that do not require immediate access, while earning income from them.

Unlike other types of funds that aim to grow your wealth by taking on some level of market risk, cash management funds are designed to protect your wealth instead. 

In this article, I will look at the benefits and risks of cash management accounts, as well as share our considerations in choosing a cash management account. 

I will also find out what are the various ways to access cash management accounts in Singapore.

What are the benefits of cash management accounts?

Cash management accounts offer a relatively low-risk option for us to earn a potentially higher return on our cash.

For example, the Fullerton SGD Cash Fund offers a yield of close to 3.2% as of 4 October 2024.

This is above the yield on the 6-month Singapore T-bill, and above the 1-year return on the SSB. 

If you are worried about having too much exposure to a single bank or platform, cash management accounts allow you to spread out your exposure with a small investment amount required. 

Introducing money market funds and bond funds

As we shared earlier, cash management accounts aim to earn a higher interest rate by investing in money market funds or bond funds. 

Hence, the most important factor to consider is the underlying fund that your cash management account would invest into. 

Cash management accounts that invest in Singapore-dollar denominated money market funds or bond funds usually offer exposure to a few of the popular options in the table below. 

You can see that the Fullerton Cash Fund is the most popular option with a fund size of over $5.0 billion as of June 2024.

This is followed by the United SGD fund, which has a fund size of $1.7 billion, and the Phillip Money Market Fund, which has a fund size of S$1.4 billion as of May 2024.

The Lion-Maribank SavePlus is the latest fund to be established on 4 July 2023, and has a fund size of $469 million as of 31 May 2024.

What to consider when buying money market funds or bond funds?

With so many money market funds to choose from, you might be wondering how we can select a fund best suited for our portfolios. 

There are a few factors we would consider, and these would include:

1. Underlying investments of fund
2. Yield of funds
3. Fund level fees

#1 – Underlying investments of fund

While cash management accounts typically invests in funds that are highly liquid and aim to generate a return above short term bank deposit or lending rates, there are differences in the underlying instruments that these funds can invest in.

At one end of the spectrum, there are money market funds that place the funds into bank deposits, such as the Fullerton SGD Cash Fund. These are seen to be relatively safe as the banks are financial institutions with good credit ratings. 

Next, some money market funds would place the funds in short term government bonds known as T-bills, or other short term high quality bonds. 

Funds that invest in short term government securities and other money market securities include the Phillip Money Market Fund, Lion Global SGD Enhanced Liquidity Fund, Lion Global SGD Money Market Fund, and United SGD Money Market Fund. 

Moving up the spectrum, there are some funds that would also invest in other debt instruments such as corporate bonds to boost their returns. This would include the United SGD Fund and Nikko AM Shenton Short Term Bond Fund. 

Lastly, there are funds that may invest in interest rate securities, which includes any financial instrument that pays an interest. The LionGlobal Short Duration Bond Fund would be a fund with such a mandate. 

The Lion-Maribank SavePlus Fund has holdings in the Lion Global SGD Enhanced Liquidity Fund, LionGlobal Short Duration Bond Fund, and T-bills as of July 2023.

We can compare the risks relating to each fund by comparing the weighted duration of each fund. The longer the weighted duration is, the longer it will be before the bonds held by each fund will mature. While this could drive potentially higher returns, it could also present more interest rate risks if there is a need to sell the bonds at a loss before they mature. 

Here, the Fullerton SGD Cash Fund, Phillip Money Market Fund, and United SGD Money Market Fund have a weighted duration of less than two months. This means that on average, the bonds that the funds are currently holding on to will mature in less than two months.

However, the LionGlobal Short Duration Bond Fund, United SGD Fund and Nikko AM Shenton Short Term Bond Fund have longer average maturities of more than a year. 

There are also significant differences in the average credit ratings of the bond holdings, even though they are all investment grade on average. For example, while the bonds held by United SGD Money Market Fund have a strong credit rating of AAA on average, the bonds held by the LionGlobal Short Duration Bond Fund have a weaker credit rating of BBB+ on average. 

#2 – Gross yield 

Amongst the funds that only invest in money market securities, the Lion Global SGD Enhanced Liquidity Fund and the Lion Global SGD Money Market Fund has the highest gross yield of 4.1% as of 31 May 2024. This is followed closely by the Fullerton SGD Cash Fund and the United SGD Money Market Fund.

As these money market funds use short term instruments, the gross yield can change quickly when interest rates move. This is why the past performance should not be taken as an indication of future performance. 

The Nikko AM Shenton Short Term Bond Fund has the highest gross yield of 5.08% as of 30 April 2024. It is able to generate a higher return mainly because it invests with bonds with a longer maturity and slightly weaker credit rating. 

#3 – Fund level fees

Apart from the gross yield, we should also consider the fund level fees to be able to calculate the net return we are able to get from investing in these funds. 

These fund level fees include the fund management fees, which are fees you are generally paying to fund managers to manage your cash.

The good news is that the fees on most popular funds offered in the cash management accounts have typically lower fees compared to equity funds.  

Here, the Fullerton SGD Cash Fund stands out for having the lowest expense ratio of 0.15% per annum. The expense ratio will include the fund management fees and other fees like administration, marketing and distribution.

Where to buy money market funds?

After identifying which fund to buy, we can consider which platform to set up our cash management accounts and purchase the money market funds or bond funds. 

The Fullerton SGD Cash Fund is most widely available, and can be purchased on Moomoo, Webull and Tiger Brokers. While Endowus also carry the Fullerton SGD Cash Fund in its Cash Smart portfolio, it is paired with the Lion Global SGD Enhanced Liquidity Fund.

What to consider when deciding which platform to purchase a money market fund? 

There are a few factors we would consider, and these would include:

1. Platform fees
2. Time required for withdrawals
3. Supported source of funds
4. Automatic sweep 

#1 – Platform fees 

There are no platform fees to purchase and hold the funds on Moomoo, Webull, Tiger, Phillip and MariBank. 

However, robo-advisors charge a small platform fee. Endowus charges 0.05% per annum for cash management funds, StashAway charges a management fee of 0.15% per annum on StashAway Simple, while Syfe charges a fee of 0.1% per annum for its cash portfolio. 

#2 - Time required for withdrawals

Since cash management funds are meant to be liquid, it is important to consider how long it takes for you to redeem the funds and withdraw your cash from the platform. 

Most cash management solutions can receive your deposits and process the instruction within 1-3 business days. However, where most solutions may differ is in the speed of withdrawals.

Most brokerage platforms offer T+1 withdrawal, i.e. your funds will reach your bank account 1 business day after you submit your withdrawal request. Brokerage platforms may also offer you fire power to make investments within the platform on the same day that the fund has been redeemed.

Robo-advisors take a longer time for your funds to be redeemed and withdrawn to bank accounts, typically 3-4 business days. In some cases like Endowus and StashAway, it may take up to 6 business days to fully process due to lengthy settlement and reconciliation processes.

#3 - Supported sources of funds — Cash, SRS

Most brokerage platforms only accept cash as the source of funds for cash management accounts.

Moomoo and Webull offer DDA from your bank account which makes it easy for you to transfer funds and put them to work.

Robo-advisors like StashAway and Endowus accept both cash & SRS which make them useful for managing your idle SRS funds. 

#4 - Automatic sweep features

While cash management accounts are straightforward in nature, some brokerage platforms offer tools for investors to make better use of their cash management accounts.

For example, Moomoo Cash Plus, Tiger Vault, Webull Moneybull and Phillip Smart Park allow you to sweep uninvested cash into cash management account everyday.

This not only helps you earn extra yield on your idle cash, but they also allow you to maintain your buying power to trade stocks and buy funds. When you subsequently decide to buy a stock, funds from your cash management account can be automatically used to settle your trades.

What are the risks of cash management accounts?

While money market funds have relatively low risk, they are not capital guaranteed. What this means is that there is still a chance that there could be a negative return in a single day in some extreme cases. 

Bond funds carry a higher risk as there is a risk of capital loss in the event of default by the underlying bond issuer. Hence, it is important to compare the holdings and average credit ratings of each bond fund. 

Also, while short term nature of money market funds typically present lower interest rate risk, we need to be mindful of potential reinvestment risks. For example, we may not be able to get equally attractive investment opportunities when we decide to redeem should interest rates decline. 

Unlike deposits in savings accounts, these funds are also not insured under Singapore Deposit Insurance Corporation Limited (SDIC).

What would Beansprout do?

Cash management accounts are a great tool to grow your savings in a relatively safe manner.

When putting your cash to work with various money market funds and bond funds, it is important to consider the underlying holdings of the fund, the gross yield, and the expense ratio. 

The Fullerton SGD Cash Fund has the largest fund size, lowest expense ratio, and one of the highest gross yield amongst the money market funds as of June 2024. Read more about the Fullerton SGD Cash Fund here.

The Fullerton SGD Cash Fund can be accessed via Tiger Brokers, Moomoo SG, and Webull Singapore and at zero purchase fee and platform fees currently. 

If you would like to use your SRS funds, then the Fullerton SGD Cash Fund is available on Endowus together with the Lion Global SGD Enhanced Liquidity Fund in the Endowus Cash Smart – Secure portfolio. 

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