Trailer fees are commissions paid by fund managers to distributors (i.e. your broker/financial advisor) when clients choose to invest in a fund. This is paid continuously for as long as an investor holds the fund, and usually ranges between 15%-50% of the annual fund fees, which could be as much as 1% per annum. This leads to higher fund-level fees, and a potential misalignment of incentives between an investor and distributor.
Thus, Endowus clients get back 100% of these trailer fees as Cashback. We are committed to staying independent and completely focused on building the best portfolios for you, rather than selling you products that pay us the highest fees.
When will I receive Cashback?
Generally, we distribute Cashback every quarter, as soon as we receive it from the fund managers. For example, you can expect to receive Q1 Cashback in Q2.
Where does Cashback go?
For Cash investments, we will credit Cashback directly to your Endowus Cash Balance.
For CPF or SRS investments, we will credit Cashback directly to your CPF Investment Account or SRS account with your Agent Bank.
How do we calculate Cashback?
Currently, on a quarterly basis, we tabulate and apportion trailer fees based on the holdings each client has with us. Every quarter:
- We group clients who invest in the same share class of a fund (which pays trailer fees) using the same funding source (CPF, SRS, or Cash). Each client may fall within one or more groups, depending on the client’s investment.
- Next, we calculate the total amount of estimated trailer fees that we expect to receive from the fund manager for each group. We do this by tracking the daily market value of the relevant fund share class and applying the daily rebate percentage we expect to receive accordingly.
- We then determine the proportion of the total amount of trailer fees that each client should receive. We do so by aggregating the daily market value of the fund share class held by each client for that quarter, and then dividing that by the total daily market value of the fund share class of our clients in the relevant group.
- Where necessary, the trailer fee will be converted to the relevant fund currency before distribution to our clients. Endowus does not take a spread on the currency conversion.
On occasion, our estimated trailer fees may not add up to the actual trailer fees received from fund managers. This may be due to differences in the trailer fee calculation methodology certain fund managers use, exchange rates, or taxes payable. In these cases, we try to reconcile the numbers before distributing the trailer fees based on our methodology. We always aim to rebate 100% of the trailer fees (net of taxes) we sight.
Please note that this is subject to our terms and conditions. For example, we may not distribute trailer fees to clients who have already closed their accounts with us. Such trailer fees are instead re-distributed to other active clients.