The wealth management industry has seen phenomenal changes over the past decade. Declining profitability, increased competition and changing demographics are but several factors driving the need to reinvent business models. Yet, cash management remains one frontier where assets in traditional fixed deposits and savings deposits continue growing even as savings and fixed deposit rates decline. The growing question investors face is how to better enhance their liquidity with rates falling to (and staying at) near-zero levels?
Source: Monetary Authority of Singapore, Jan 2021. Interest rates refer to average rates compiled from that quoted by 10 leading banks and finance companies. Deposits based on other residents in Singapore (excl. banks and institutions)
In 2018, Lion Global Investors built up the LGI Cash Management suite; comprising a trio of funds designed to optimise liquidity in a low rate environment – namely our Money Market Fund (~1%* yield), Enhanced Liquidity Fund (~1.6%* yield) and Short Duration Bond Fund (~2%* yield).
At the time, one segment of the market led the evolution of Cash Management solutions in the SGD space – we call them digital leaders. These digital leaders have leveraged on the digital-first approach to market financial products and have seen significant growth in recent years. LGI has worked hand-in-hand with partners such as iFAST Financial, among the digital leaders in enhancing liquidity with the LGI Cash Management suite.
*Weighted Yield-to-Maturity Yields are stated as of end February 2021. Past Performance is not necessarily indicative of future performance.
Leading the Cash Evolution
The underlying success factor these leaders have in common is digitalization. While digital transformation is nothing new, investors have grown increasingly digitally-savvy and self-directed. Undeniably, the pandemic turbocharged the pace of a structural trend that was already accelerating.
From an investment perspective, holding excess idle cash, especially in low interest rate environments, has historically resulted in poor long-term results. The real-life implication of this is the erosion of spending power of an average consumer especially after adjusting for inflation. Investors and consumers alike have started to realise the need to better preserve and grow their cash.
Source: Lion Global Investors, Feb 2021
As at February 2021, the total assets of our Cash Management solutions have crossed S$1.5 billion.
LGI continues to develop the components that power Cash Management providers. As the landscape continues to evolve, LGI looks to innovate beyond SGD liquidity and shorten settlement times to support leaders in the evolution of enhancing liquidity.
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