Maximising Your Financial Growth: Opportunities Beyond the 2.5% CPF Return June 20, 2023

In today’s volatile financial landscape, many individuals are constantly seeking ways to maximise their returns on investments. One such avenue is through the Central Provident Fund (CPF), a comprehensive social security savings scheme in Singapore. Many are satisfied with the stable returns offered by CPF but what if you could gain more?

Let’s explore how you can potentially maximise your CPF savings beyond the standard 2.5% p.a. in the Ordinary Account (OA) and 4% p.a. in the Special Account (SA). In this Market Journal, we will share different funds that not only offer attractive returns but also align with the rules and regulations set by CPF. So, whether you’re an investor who prefers to play it safe, or one who’s willing to take on a little more risk for higher returns, we’ve got some suggestions for you.

However, with almost 2,000 funds on our platform, you might be unsure where to start. Not to worry. We’ve handpicked a list of CPF Funds for your consideration.

The following funds have been selected based on the focus of evergreen balanced/multi-asset funds and short-duration bond funds that are expected to beat CPF-OA’s 2.5% interest rate, while maintaining minimal volatility:

1. First Sentier Bridge Fd A (Semi-Ann Dist)
2. PineBridgeIF – Acorns of Asia Balanced Fund
3. Schroder Multi-Asset Revolution Class A
4. LionGlobal Short Duration Bond Fd Cl A SGD (Dis)
5. Nikko AM Shenton Short Term Bond Fd (S$)
6. UOB United SGD Fund CL A (Acc)

The recent banking crisis has put pressure on central banks to increase market liquidity. This is expected to drive equities higher. Potential peak interest rates are also expected to lift tech sector valuations.

In comparison to the US, Asian central banks have shown a more accommodating monetary policy stance, pointing to a better outlook for economic growth. Given that Greater China constitutes a significant portion of Asia, the region is also likely to reap benefits from its reversal of the zero-Covid policy.

If you’re an investor with a higher risk appetite, here’s a list of funds for your consideration:

1. Global Equity Fidelity Global Div Fd SR-MINCOME(G)-SGD
2. Technology Allianz GIF Glb Artificial Intelligence ET H2 SGD
3. Asia Equity Schroder Asian Equity Yield Fd Cl A

Curious about what makes these funds distinct from others in the market? Let’s take a deeper look at them.

First Sentier Bridge Fd A (Semi-Ann Dist)

The fund aims to provide investors a consistent income and medium-term capital stability through investments centered around the Asia-Pacific region, excluding Japan. This is achieved by channelling most, if not all, of its assets into the Dublin-based FSSA Asian Equity Plus Fund (pertaining to the equity segment) and the Dublin-based First Sentier Asian Quality Bond Fund (concerning the fixed income segment). The fund presents itself as a comprehensive investment solution for high-quality Asian companies and investment-grade fixed income. It operates with a balanced portfolio, intending to ensure capital stability and nurture capital growth over the medium to long term.

PineBridgeIF – Acorns of Asia Balanced Fund

The PineBridge International Funds – Acorns of Asia Balanced Fund is custom-made to fit the requirements of Singapore investors. It combines two solid investment ideas: high-conviction Asian stocks, presenting rapid-growth prospects, and Asian bonds, primarily denominated in Singapore dollars, which offer stable returns and help reduce volatility. Here are five reasons why investors should consider investing in this fund:

A fine balance of opportunities in Asia: The Asia equity portfolio is benchmark agnostic and focuses on high-quality opportunities across sectors and markets; while robust credit selection helps ensure the fixed income portfolio is protected in a diverse set of scenarios.

1. A fine balance of opportunities in Asia: The Asia equity portfolio is benchmark agnostic and focuses on high-quality opportunities across sectors and markets; while robust credit selection helps ensure the fixed income portfolio is protected in a diverse set of scenarios.
2. Rigorous security selection process incorporated with ESG considerations: Key to the fund’s strategy is a fundamental, bottom-up approach that focuses on high-conviction ideas that are backed by rigorous research. Risk management is integrated throughout the investment process, including environmental, social and governance, or ESG considerations.
3. Responsive to market changes: The fund is actively managed to keep investors well anchored regardless of the market cycle.
4. Stability from SGD Bonds Amid Volatility: The SGD bond market has remained stable, underpinned by Singapore’s strong economic fundamentals and a triple A sovereign rating.
5. Strong Asian secular trends offer a tailwind for growth: Digitalisation, rising wealth and consumption, ESG and urbanisation, are set to drive the region’s growth in years to come.

As of 30 April 2023, the fund (bid-to-bid) has outperformed its benchmark in the 3-year, 5-year, 10-year time periods, and since its inception, ranking in the first quartile among its peer group over the 1-year, 3-year, 5-year, and 10-year periods. The Fund accepts investments via Cash, SRS, CPF-IS OA and CPF-IS SA Funds.

Schroder Multi-Asset Revolution Class A

Schroder Multi-Asset Revolution delivered positively in April with both equities and bonds contributing to absolute performance. Equities led gains, with the preference for growth over value within global equities adding to returns. Fixed income exposures were also positive, where the holdings in Singapore bonds and credit strategies were among the best performers.

Why should you consider Schroder Multi-Asset Revolution?

1. It offers a regular income of 4% p.a. dividend payout, payable quarterly.
2. The portfolio is globally diversified across different regions, sectors, asset classes, and investment styles.
3. The equities allow for active positioning through choppy markets while fixed income helps to protect downside risks.

LionGlobal Short Duration Bond Fd Cl A SGD (Dis)

The LionGlobal Short Duration Bond Fund is designed to provide a total return of capital growth and income over the medium to long term through an actively managed portfolio of Singapore and international bonds; high quality interest rate securities; and other related securities. The fund aims to help investors generate a potentially higher return than traditional fixed deposit rates. Being a sizable fund, this gives us the ability to diversify across issuers in different geographies and sectors. There are 3 characteristics of the LionGlobal Short Duration Bond Fund.

1. Regular distribution payout. Investors can potentially capture benefits over fixed deposits and generate sustainable income. As of 31 March the yield to maturity was 5.8% p.a.
2. Greater stability. The weighted credit rating of the fund is investment grade, with an average duration of 1.8 years.
3. Diversification. The fund holds 150-200 bonds, and can gain access to a range of fixed income opportunities.

The Lion Global Short Duration Bond Fund has a proven track record in 2012 and has outperformed its benchmark since inception.

Nikko AM Shenton Short Term Bond Fd (S$)

The fund offers attractive yield enhancement over SGD fixed deposits at relative low duration. The fund benefits from the recent interest rate hikes as the fund’s yield to maturity increased to ~ 4-5% which allows investors to run on this trend and increase returns overtime. More importantly in our current environment, the capital from matured bonds will be reinvested into higher yielding bonds due to the higher interest rates. The fund will benefit from the higher interest rates and create value/enhance total returns for investors.

1. The fund invests in high quality short duration bonds which are well diversified across geography, sectors, issues and issuers. The fund has a T+1 redemption cycle.
2. It is defensive in nature with capital preservation in mind to protect clients’ capital during market uncertainties as it has an average credit rating of A-.
3. It uses a laddered strategy approach with bonds spread across different maturity periods which smoothen the impact of interest rate volatility in both rising and falling interest rate environments.
4. It invests in a range of sectors and countries for diversification, and non-SGD exposures are hedged back to SGD to minimise foreign currency risk.
5. The fund has also recently been awarded Top Mutual Fund for being Best-in-Class in the Asia Fixed Income category for 2022.

UOB United SGD Fund CL A (Acc)

The United SGD Fund is the flagship fixed income fund from UOB Asset Management Ltd (UOBAM), with a fund size of over S$1.66 billion (Source: UOBAM, as of 31 March 2023). It has a strong track record of over 24 years and is one of the most popular fixed income funds in Singapore with its low-risk profile offering stable returns to investors.

1. Offering enhanced returns over Singapore dollar deposits with a focus on short duration.
2. It is well positioned to handle various market conditions.

In order to mitigate the impact of volatile interest rates, the United SGD Fund employs a laddered investment strategy. It invests in investment-grade bonds bearing different maturity dates over a three-year timeframe. This strategy aims to capitalise on the upward momentum of rising interest rates with the objective of boosting total return for investors.

Fidelity Global Div Fd SR-MINCOME(G)-SGD

1. Strong track record: Top quartile rank since launch and over 3M, 6M, 1Y, 5Y, 10Y periods.
2. Consistent and growing level of income: The fund’s dividend payout (dollar amount) has grown every year since launch in 2012. Average monthly dividend payout of ~3.0% p.a.
3. A proven defensive core equity solution: The fund seeks to invest in quality companies globally at attractive valuations, underpinned by a growing level of income and potential for capital growth.

Typically, the portfolio will have less exposure to cyclicals that tend to be more sensitive to the overall macro-environment, and more exposure to defensive companies with steady cash flows and resilient earnings.

Allianz GIF Glb Artificial Intelligence ET H2 SGD

The Allianz Global Artificial Intelligence fund is focused on achieving long-term capital growth by investing in global equity markets, with an emphasis on the evolution of artificial intelligence (AI). Developments around generative AI and GPT technology validate that the long-term demand for companies within AI infrastructure should remain strong. This is due to the computational requirements for training complex AI models and the inference needed for ongoing applications. Furthermore, AI applications will be needed to optimise the functionality of these new tools, and the plug-ins are merely the first step towards greater customisation for individual enterprises and consumers. Several companies in the AI-enabled industry have already announced GPT-related functionality added to their services to improve customer engagement and experience. Though AI is still in its early stages of transforming the economy, business processes and consumption habits, it is fast approaching a turning point. The fund management team, who have been together for over 20 years, are well-positioned to understand and capitalise on this near-term inflection point as it expands into a broader set of monetisable use cases for a wide variety of companies over the medium to long term.

Schroder Asian Equity Yield Fd Cl A

In the past month, the Schroder Asian Equity Yield Fund (A Dis SGD) posted a return of 0.1%, in contrast to the reference benchmark’s -1.4%. This performance brings the fund’s year-to-date return to 7.5% versus the benchmark’s 1.8%, showing the fund’s outperformance over the benchmark in the last 1, 3, and 5 years (p.a.).

1. Asian dividends have tripled over the last two decades, and still possess significant potential to enhance their dividend payout in comparison to other regions.
2. This fund offers the opportunity to tap into the robust growth potential of Asia through a blend of Dividend Cows, Dividend Growers, and Dividend Surprises.
3. The fund’s consistent alpha generation is due to its unconstrained approach that concentrates on bottom-up stock selection. The fund’s management is stable and seasoned, backed by a team of 41 career analysts spread across six offices.