United SGD Money Market Fund: A good alternative to T-bills?

What happened?

We've seen more interest in T-bills with the cut-off yield in the latest auction reaching 3.85%.

However, some investors have asked if there is another way to get exposure to T-bills and earn a higher yield compared to savings account, without going through the process of applying for T-bill and building a bond ladder themselves. 

We recently came across the United SGD Money Market Fund, which has a significant amount of its portfolio currently in Singapore T-bills. Let's take a look to see if it might be worthwhile considering for investors who are looking at an easy way to earn a higher yield. 

What you need to know about the United SGD Money Market Fund

The United SGD Money Market Fund aims to provide a return which is comparable to Singapore dollar short term deposits.

The fund is managed by UOB Asset Management, an established fund manager in Singapore and a subsidiary of UOB. 

Watch the video below for a quick introduction about the United SGD Money Market Fund.

#1 – The fund invests mainly in MAS T-bills and SGS Bonds

The United SGD Money Market Fund invests in short-term debt securities and money market instruments. 

Based on the fund factsheet, the United SGD Money Market Fund invests primarily in MAS Treasury Bills and SGS Bonds as of 30^th April 2023. 

In fact, close to 96% of its holdings are in Singapore government bonds as of 30^th April 2023.

This would include various MAS-issued T-bills and SGS bonds, including the T-bills maturing in May 2023 and June 2023. 

What this means is also that the average credit rating of its holdings of debt securities is high, with the Singapore government bonds accorded the strongest credit rating by international credit rating agencies. 

With a significant portion of the fund’s holdings in MAS T-bills maturing in May and June, the United Money Market Fund has a short effective duration of just 0.12 years as of 30^th April 2023. 

#2 – Higher returns compared to bank deposits historically

As a money market fund targets better returns compared to savings deposits by investing in higher yielding securities, we can take a look to see if the fund has been able to deliver on such higher returns historically. 

Since its inception in June 2018, the United SGD Money Market Fund has generated positive quarterly returns and an average return of 1.54% per annum (as at December 2022). 

The fund has also been able to generate higher returns compared to bank deposits historically.

What else should you consider before investing in the United SGD Money Market Fund?

#1 – Money market funds are not capital guaranteed

While the United Money Market Fund’s main objective is to preserve capital and is seen to be low-risk, it is not capital guaranteed. 

Also, money market funds are not protected by the Singapore Deposit Insurance. 

#2 – Management fees 

The United SGD Money Market Fund is managed by Joyce Tan, who is the Head of Fixed Income Asia & Singapore at UOB Asset Management.   

As the fund is managed by an investment professional, there will inevitably be fees involved. In this case, the management fees for Class A1 tranche of the United SGD Money Market Fund is at 0.25%. 

What would Beansprout do?

As investors who are looking for ways to make our savings work harder, it’s always good to know that there are now more options for us to consider. 

The United SGD Money Market Fund offers a potential return that is higher than savings deposits by investing in low-risk debt instruments such as Singapore government bonds.

This would make it an alternative to consider for investors who are interested in investing in the T-bills, but do not want to go through the hassle of applying and rolling over the T-bills when they mature. 

However, the disadvantage is that by getting a professional fund manager to do it for you, there will be fund management fees incurred. The money market fund is also not capital protected. 

If you are interested in the United SGD Money Market Fund, you can learn more here. 

The United SGD Money Market Fund is available through UOB's network of distributors. More recently, you can also access the United SGD Money Market Fund on Tiger Vault.  

Also, find out what you would need to consider before you put your money in a cash management account. 

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