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Risk & Return

  • Duration risk refers to the sensitivity of portfolio/ bond prices to changes in interest rates. Investments with longer durations are more sensitive to interest rate changes. Syfe's Income+ portfolios are built focusing on assets with short to medium duration.

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  • Bonds tend to have an inverse relationship with interest rates, which means rising interest rates negatively impacts bond prices while falling interest rates help bond prices rise.

    As a result, as and when the FED starts to cut interest rates,, the Income+ portfolios are likely to benefit with capital gains, in addition to current high portfolio yield.

     

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  • Income+ and Cash+ are both portfolios from Syfe designed to meet different investment goals.

    • Purpose:
      • Income+ is tailored for investors seeking consistent income with a potential for capital appreciation. Income+ portfolios are constructed with actively managed funds. We have diversified the Income+ portfolios  by selecting funds which have exposure to different fixed income assets, such as government bonds, corporate bonds, convertible bonds, etc. 
      • Cash+ is designed as a liquid alternative to petty cash. Cash+ is currently composed of US Dollar money market funds. The objective of Cash+ is to achieve a return in US Dollars in line with or above the prevailing money market rates, with primary considerations of maintaining low risk and high liquidity.
    • Risk & Return:
      • Income+ might carry higher risks compared to Cash+ because it can invest in a broader range of fixed-income instruments. 
      • Cash+ is more conservative, focusing on capital preservation while offering competitive yields.
    • Investment Horizon:
      • Income+ is suitable for those with a medium to long-term investment horizon who also wish to receive periodic income.
      • Cash+ is ideal for those looking for a short-term solution to park their funds with better returns than petty cash or cash sitting in the bank.
    • Underlying Investments:
      • Income+ invest primarily invests  in authorized fixed income funds and multi asset funds. 
      • Cash+ invest primarily invests  authorized money market funds and other cash equivalents.

    Remember, the choice between Income+ and Cash+ should be based on your individual financial goals, risk tolerance, and investment horizon. Always consider seeking advice from a financial advisor to make an informed decision.

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  • All investments face some level of volatility because of market dynamics. Price volatility in the Income+ portfolio is a natural part of investing, and here's why:

    • Market Factors: Security values fluctuate due to changes such as interest rate shifts or economic news.
    • Economic Data: Reports on inflation, unemployment, or other global events can influence investor decisions and, consequently, security prices.
    • Diversification: While Income+ holds a variety of assets to help reduce risk, it doesn't eliminate it. Different assets can perform differently at any given time, leading to some level of volatility.
    • Distributions Timing: Sometimes there's a timing difference between when bond interest is received by the funds and when distributions are made to fund investors. If distributions are paid out of capital before this interest comes in, it can temporarily influence the portfolio's price.

     

    It's the short-term ups and downs investors might see. But remember, over time, a diversified portfolio like Income+ aims to provide steadier, more consistent returns despite these fluctuations.

     

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  • Both terms are related to the income you receive or may receive from an investment, but they have distinct meanings:

     

    Payout Rate: This is the rate at which a specific amount is distributed to investors from the Income+ portfolio. It's typically expressed as a percentage of the invested amount and represents the regular income investors can expect to receive annually. 

     

    Portfolio Yield: This refers to the annual income generated by the portfolio's investments as a percentage of the portfolio's total value. It provides a measure of the average return on the portfolio's current investments in terms of income. Portfolio yield can vary based on the underlying investments' performance and changes in market conditions.

     

    In simpler terms, the payout rate is what you, as an investor, can expect to receive regularly, while the portfolio yield is a measure of the income generated by the investments themselves. The two might not always align perfectly because the portfolio could reinvest some of the income or use principal to maintain a consistent payout rate.

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  • The portfolio payouts and actual returns serve two different purposes. The payout refers to the income or distribution paid to the investors. On the other hand, the actual portfolio returns reflect the total performance, including both income (like dividends or interest) and capital appreciation or depreciation (rise or fall in the value of investments).

     

    There can be situations where the investments may have given higher dividends (contributing to the payout) but might have decreased in their market value, affecting the total return. Conversely, an investment might appreciate in value but might not distribute much income.

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  • While Income+ is managed to reduce risk through diversification and professional management, all investments inherently come with certain risks:

    • Interest Rate Risk: Changes in interest rates can impact bond prices. Typically, when rates rise, bond prices drop, and vice-versa.
    • Credit Risk: There's always a chance an issuer might not meet its payment obligations, affecting the value of the security with the bond funds.
    • Market Risk: Economic factors, geopolitical events, or broad market declines can affect the portfolio's value.
    • Liquidity Risk: Some securities might be harder to sell or might have to be sold at a discount to their value.
    • Inflation Risk: Over time, the purchasing power of your investments might be eroded by inflation.
    • Diversification Risk: While diversification reduces risk, it doesn't eliminate it. Some assets in the diversified portfolio might underperform.
    • Operational Risk: Things like system failures or human errors can affect any financial operations, including those of the portfolio.

    It is essential to align your investments with your personal risk tolerance and financial goals.

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