How do Cash Smart Secure, Enhanced and Ultra generate potential returns? How are the projected return ranges calculated?

How are the projected return ranges calculated?

We use a projected return range, instead of a fixed yield, based on the following considerations:

  • We consider actual realised yield as returns
  • Yields are not guaranteed

The projections are updated on a monthly basis based on the latest updates from the Fund Managers on the individual funds. Please refer to for the last projected return range of each Cash Smart Portfolio.

For more information on how to choose between Cash Smart Secure, Enhanced and Ultra, please kindly refer to 

Difference between returns and yields

The return is the increase or decrease in the investment value of the underlying fixed income holdings, while the yield is the payouts generated by the fixed income holdings.

Imagine you are giving a loan of $10,000 to your friend, Mr A, who promises to repay you the sum in a few years’ time. Meanwhile, Mr A agrees to pay you a monthly interest as a token of appreciation. Here, the monthly interest you will receive is the yield (or yield-to-maturity) of the loan.

Now, let’s imagine that Mr A suddenly loses his job two months later, and you’re not sure if he can repay the $10,000. Mr A offers to pay you a higher monthly interest rate just to prove that everything is fine (i.e. the yields have increased), but you still feel uneasy.

At the same time, a mutual friend, Ms B, hears of this situation and thinks that the loan is interesting – the interest rate is attractive, and for some reason, she trusts that Mr A can find a job soon. She offers to replace you as the lender, buying the loan from you for $15,000.

If you do “sell” the loan to Ms B, you would have made a profit of $5000 AND the two monthly interest you have received so far. This is the return of your loan.

Let’s put this back into the perspective of Cash Smart. The underlying funds of Cash Smart each invest in the “loans” to companies. They will also each receive interest on the loans, and on a portfolio-level – this is the Cash Smart yield.

Meanwhile, the “loans” are subject to various factors, including the financials of the companies, or even the market environment as a whole, and such factors influence the value of the loans that the funds can earn if they chose to sell the loan to a third party. This value changes on a daily basis, and is reflected as the Cash Smart projected return.

What are the risk considerations for investing in Cash Smart?

Cash Smart Portfolios, which consist of money market and/or short-duration fixed income funds (unit trusts), are designed to deliver relatively stable returns compared to other fixed income portfolios of longer durations. 

Nonetheless, there is risk in investing in the Cash Smart Portfolios, and they are not capital-guaranteed. Understanding the historical maximum loss of the respective portfolio can be a good way to assess whether the portfolio is suitable for your risk appetite.

Historical maximum loss (“drawdown”) is the fall from the peak (the highest point) to trough (the lowest point) in investment value, based on historical performance. 




Investors may use the historical maximum drawdown as an indication of the maximum loss they may have experienced by investing in the specific portfolio over a period of time. 

Please note that the drawdown figure is based on historical performance, which may not be indicative of future performance. There is always the risk that the latest maximum drawdown will be overtaken by a new maximum drawdown in the future. Investors should therefore view the historical maximum drawdown as a reference point and not a guarantee of future maximum loss.

Why does Endowus use yields, and NOT returns, as the Cash Smart “projected returns”?
As illustrated above, there’s a fundamental difference between yields and returns, and that is the timeframe:

  • Yields are based on the future payouts that you’re expected to receive. When Mr A offers to increase the payout, your yield increases accordingly. As such, yields are forward-looking.
    Returns are based on what you have already earned, like the payouts you have already received and the change in today’s price compared to the prices in the past.
  • Returns, as such, are backward-looking.

We think that the forward-looking yields are a more accurate measure of projected returns, as yields are a “promised” payback figure that the funds are certain to receive as long as they hold the loans to maturity, which is most often the case.

Additionally, when loans are held to maturity, the investor will receive the principal sum back – in other words, the lender will always profit as long as the loan matures. In this regard, using backward-looking returns assumes that the fixed income security is sold at that point in time (instead of being held to maturity), which may be inaccurate and inconsistent across various time horizons that each individual investor has.

How is the gross projected yield calculated?
The calculation for the gross projected yield is based on the annualised amortised yield estimate for the portfolio’s holdings.

  • It takes into account the individual yield to maturity of the securities, the weighted average maturity, and an amortised schedule of NAV calculation - this is calculated using the hold to maturity value of the overall portfolio.
  • We then take out the total expense ratio (TER) net of any trailer fee rebates paid back to your account. The TER is calculated to include all costs related to the fund including the annual fund management fee (AMF).
  • We also account for the Endowus Fee of 0.05%.
  • This gets us to the net adjusted annualised amortised yield.

In calculating the range, during a period of falling interest rates, we calculate the high end of the range using the projected net adjusted yield, and the low end of the range which incorporates the potential future decline in interest rates. When interest rates are seemingly stable, we would use the projected net adjusted yield as the midpoint of the range.

The range is a more accurate reflection of the actual potential realisable yield by the investor, as the underlying securities holdings will fluctuate.


Note: As of Nov'21 Endowus Cash Smart Core is now referred to as Endowus Cash Smart Secure. There is no change in the underlying investment offering



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