Created by MoneyOwl and Fullerton Fund Management, WiseIncome provides a sustainable income stream to supplement CPF LIFE payouts in retirement.
In 2021, MoneyOwl partnered Fullerton Fund Management to create MoneyOwl WiseIncome, a multi-asset portfolio with broad sources of returns for sustainable income. One year on, the two teams look back at the journey that led to the genesis of the fund, what are some lessons learned along the way, and what investors can look forward to in the near future.
The big idea
Lena Teng, Head of Solutions at MoneyOwl, says, “We wanted to provide clients who are looking for passive income with a seamless solution to invest and drawdown from their investments effortlessly. We drew inspiration for the design of WiseIncome from Fullerton’s Heritage series. We felt the approach of paying out a dividend based on the % of the portfolio value served as a good alternative to the 4% withdrawal rule we use for advising clients on a sustainable way to draw down from their investments.”
Describing the planning process of the fund, Teng says, “Our investment committee sat down with the fund management team comprising of a team of seasoned portfolio managers and experts in fixed income and REITs to collaboratively design the fund. Fullerton very graciously accepted our desire for the global equities portion to be index tracking while we relied on their intimate knowledge of the Asian fixed income space and S-REITs for credit assessment and stock selection. After we settled on the allocation, we did rigorous back testing of historical data to ensure that the fund would be able to sustain the proposed payout rate in the long run.”
Stephen Tan, Head of Sales, Intermediaries at Fullerton Fund Management, adds, “Our research has found that a diversified portfolio of global stocks, Asian bonds and REITs could reduce overall portfolio volatility, and help investors achieve higher levels of income (via Asian bonds and REITs) and growth (via global growth stocks).”
How MoneyOwl WiseIncome closed a gap in the market
According to Tan, a recurring sentiment from Singaporeans is that there is a gap between their financial position and retirement goals. “They recognise that the rising cost of living and expenses related to elder-care, coupled with rising life expectancies and low deposit returns, could mean they need to retire later,” Tan says.
He shares, “We designed WiseIncome as an investment solution to hit a few sweet spots: (1) help investors grow their assets over time without taking on a disproportionate level of risk; (2) provide a sustainable income via multiple income sources to supplement pensions; and importantly (3) keeping investment expenses low.”
Lessons learned along the way
“Early on, we were challenged on our decision to go with global equities instead of Asian equities because China was doing very well,” Teng reveals. “On hindsight, we are glad that we went with age-old wisdom to not place our bets on any particular economy but rather to just buy the whole market through our indexed ETFs. This has helped WiseIncome tide through the China tech crunch last year when the government announced a slew of regulations to clamp down on the industry in order to maintain social order.”
In addition, the team learnt the importance of having intimate knowledge of the market when it comes to credit assessment. “Fullerton’s team of managers very early on decided to exit all positions in Huarong even before they officially defaulted and were downgraded by the credit agencies. This enabled WiseIncome to suffer minimal losses, thus showcasing the crucial role of credit selection to sustain the income payout that we promised to our clients,” Teng shares.
The road ahead
Vincent Chan, Head of Asset Allocation at Fullerton Fund Management, says, “Investors need to recognise that we are investing in a different regime of high inflation with an imminent recession. As central banks raised interest rates to control inflation, bond yields have risen substantially. Investing in JP Morgan Asia Credit Investment Grade index offers investors a yield above 5%. Singapore’s core inflation is reaching 4%. At some point, bond yields would rise sufficiently for investors to consider adding high-quality investment bonds into their portfolio. We tactically adjust the fund’s asset class exposures from time to time in response to market conditions, and also to capture quality opportunities potentially offering higher growth and income.”
Why MoneyOwl WiseIncome continues to be a sound investment solution
Even in current market conditions, WiseIncome is still a sound investment solution, says Teng. “Because we have paired it with S-REITs, WiseIncome has done well in the inflationary environment as we have started to see rents increased even as Singapore relaxes its Covid measures. At present, S-REITS is the best performing asset class compared to global equities and even global bonds. This has helped cushion the overall decline in WiseIncome compared to a typical 60/40 balanced fund.”