Fullerton SGD Cash Fund Review - Better than T-bills and fixed deposit?

What happened?

Many investors who have come across cash management accounts such as Moomoo Cash Plus, Webull Moneybull or Tiger Vault would probably have heard of the Fullerton SGD Cash Fund.

The Fullerton SGD cash fund is used by several platform in the cash management accounts. 

To help you understand more about the Fullerton SGD cash fund, we will look at what the fund invests in, as well as benefits and risks of investing in the fund. 

We will also compare the Fullerton SGD cash fund to the Singapore T-bill and fixed deposits, to understand which might be a better option for our portfolios. 

What is the Fullerton SGD Cash Fund?

The Fullerton SGD Cash Fund is a money market fund that is actively managed by an investment manager, who aims to achieve a competitive return compared to bank deposits while providing you with liquidity. 

For example, while fixed deposit rates offer higher interest rates compared to savings account, it will require you to lock-in your funds for a period of time typically of at least 3 months. 

To allow investors to have more liquidity, the Fullerton SGD Cash Fund holds assets in Singapore Dollar deposits with eligible financial institutions with short-term investment grade rating. 

The Singapore Dollar deposits are held with financial institutions such as Bank of Nova Scotia-Singapore, Sumitomo Mitsui Trust Bank and Qatar National Bank, based on its latest factsheet.

The placement period to maturity of these assets is generally very short term, with 86% of assets maturing within 4 weeks. 

By leveraging its scale, the Fullerton SGD Cash Fund aims to achieve better pricing power in the Singapore dollar deposits compared to individuals. 

What are the benefits of the Fullerton SGD Cash Fund?

#1 – Competitive returns compared to bank deposits 

As of 31 July 2023, the Fullerton SGD cash fund achieved a return of 3.53% in the past one year. 

With higher interest rates in recent months, the annualised return of the Fullerton SGD Cash Fund has been even higher.

As of 14 September 2023, the Fullerton SGD Cash Fund achieved a 7-day annualised return of 3.7698%. 

The 7-day annualised return is calculated using the net asset value of the Fullerton SGD Cash Fund that is available here. 

#2 – Provide liquidity for investors

Compared to fixed deposits and T-bills, the Fullerton SGD Cash Fund offers more flexibility as investors are not required to hold through a maturity date.

By allowing you to redeem your funds within the next business day, you can access your funds for any financial obligations or investment opportunities.

In fact, some platforms may even allow you to use the fire power of the redeemed funds to purchase stocks on the same day. 

#3 – Actively managed by investment professionals with relatively low fees 

The Fullerton SGD Cash Fund is actively managed by Darren Tay, the Head of Treasury Management at Fullerton Fund Management.

The funds are managed dynamically to respond rapidly to changes in interest rates.

The total expense ratio of the Fullerton SGD Cash Fund is 0.15% per annum, which makes it the lowest amongst various money market funds. This would include a management fee of 0.10%, as well as other administrative expenses incurred. 

The Fullerton SGD Cash Fund has a history of more than 10 years, having been incepted in February 2009. Fullerton is a reputable fund management company and part of Seviora, a holding company established by Temasek. NTUC Income is also a minority shareholder of Fullerton. 

Is the Fullerton SGD Cash Fund safe?

While the primary objective of the cash management fund is to achieve a return that is comparable to the SGD savings deposit rate, there is effectively still a chance that there could be a negative return in a single day in some extreme cases. 

Investments into the Fullerton Cash Fund are not insured under Singapore Deposit Insurance Corporation Limited (SDIC).

Lastly, the returns of the Fullerton SGD Cash Fund may decline should interest rates start falling, as the bulk of the funds do not lock up the interest rates for more than a month. For example, we have seen that the 10-year return of the fund was just 1.10% per annum as of 31 July 2023. 

As such, you may face re-investment risks should interest rates decline and you are not able to find investment opportunities that offer a return that meet your objectives.

Is the Fullerton SGD Cash Fund better than fixed deposit?

Based on the 7-day annualised return of 3.7698% as of 14 September 2023, the Fullerton SGD Cash Fund offers a better return compared to the best 12-month fixed deposit rate of 3.58% per annum in September 2023. 

The Fullerton SGD Cash Fund also offers more flexibility compared to fixed deposit, as the funds can be redeemed anytime with next business day settlement.

However, the Fullerton SGD Cash Fund is not capital guaranteed, and all investments carry risks. As a money market fund, the Fullerton SGD Cash Fund is also not insured under the Singapore Deposit Insurance Corporation Limited (SDIC).

Lastly, the returns on the Fullerton SGD Cash Fund are subject to changes in interest rates, while you would be able to lock-in the interest rates on fixed deposits over the tenure of the deposit. 

Is the Fullerton SGD Cash Fund better than T-bill?

Based on the 7-day annualised return of 3.7698% as of 14 September 2023, the Fullerton SGD Cash Fund offers a return that is quite similar to the cut-off yield of 3.73% for the 6-month Singapore T-bill auction on 14 September.

The Fullerton SGD Cash Fund also offers more flexibility compared to the 6-month T-bill, as the funds can be redeemed anytime with next business day settlement.

However, the returns on the Fullerton SGD Cash Fund are subject to changes in interest rates, while you would be able to lock-in the interest rates on the Singapore T-bill if you hold it to maturity.

Both the Fullerton SGD Cash Fund and Singapore T-bill are not insured under the Singapore Deposit Insurance Corporation Limited (SDIC). However, the Singapore T-bill is fully backed by the Singapore government.

What would Beansprout do? 

The Fullerton SGD Cash Fund stands out amongst money market funds for having the largest fund size, highest gross yield and lowest expense ratio as of July 2023.

Hence, we would consider the fund if we are looking to earn a potentially higher return compared to savings accounts, while not locking up our funds in a fixed deposit.

This can be for spare cash we are looking to deploy in a few months’ time, or while we are awaiting the next investment opportunity.

However, we need to be aware that as with all investments, the Fullerton SGD Cash Fund is not capital guaranteed, and the current returns may not be sustained should interest rates fall.

The fund is available through various cash management accounts, including Moomoo Singapore, Webull Singapore, Tiger Brokers and Endowus.

Click here to compare money market funds and find the cash management account in Singapore. 

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