Invest Robo-Advisors

Syfe Core vs Global ARI – What’s The Difference?

Syfe Core vs Global ARI

Last updated on June 6th, 2021

Syfe recently launched their new Core portfolio.

However, Syfe has a Global ARI portfolio as well. At first glance, both of these portfolios seem rather similar!

This is because both of them invest your money in equities, bonds and gold.

So is there actually a difference between the 2 of them?

Here’s what you need to know:

The difference between Syfe Core and Global ARI

Syfe Core aims to maximise your returns given a certain risk level. Meanwhile, Syfe Global ARI aims to maintain your risk level in any market condition. In this way, Syfe Core has a rather fixed allocation, while Global ARI dynamically changes your asset allocation depending on the scenario.

Here is an in-depth comparison between these 2 portfolios:

Investing Strategy

Both of Syfe’s portfolios use different strategies to invest your funds:

Syfe Core uses a combination of 2 strategies

For your Syfe Core portfolio, you are actually using 2 of Syfe’s investing strategies:

  1. Asset Class Risk Budgeting
  2. Smart Beta

1. Asset Class Risk Budgeting

Syfe Core uses an ‘Asset Class Risk Budgeting‘ process to allocate your funds into the different asset classes.

This means that the risk that you take is distributed between the 3 asset classes found in Syfe Core:

  1. Stocks
  2. Bonds
  3. Gold

Stocks are the riskiest asset class among the 3.

Each portfolio has a ‘risk budget’ to meet. As such, your funds will be allocated to the different asset classes to give your portfolio a certain amount of risk.

Here are the 3 different Core portfolios that you can choose from:

PortfolioStocksBondsGold
Growth68.8%25.8%5.4%
Balanced38.0%51.2%10.8%
Defensive18.9%72.1%9.0%

The greater the risk budget, the higher allocation towards stocks.

2. Smart Beta

Syfe also uses the Smart Beta strategy seen in their Equity 100 portfolio. This is used to select the ETFs that are included in your stock component.

The Smart Beta strategy selects the best stock ETFs that have these 3 factors:

  1. Large-cap
  2. Growth
  3. Low-volatility

These are currently the factors that Syfe thinks will help you obtain the best returns. However, these factors may change over time!

As such, the stock ETFs in your portfolio may change as well.

Syfe’s Global ARI uses their ARI algorithm

You are able to use Syfe’s Automated Risk-managed Investment (ARI) strategy in your Global ARI portfolio.

This strategy is a combination of 2 different approaches:

  1. Global Portfolio Optimisation
  2. Risk Parity Portfolio

The aim of this strategy is to manage your risks, rather than focus on investment returns. This is because the economic conditions we experience are constantly changing.

As such, Syfe wants to use a risk-based approach to determine your asset allocation.

The funds that you invest with the Global ARI portfolio are allocated into 3 different asset classes:

  1. Equities
  2. Bonds
  3. Gold

Here is how Syfe’s ARI strategy fared against the other 2 portfolios.

Syfe ARI Performance

Syfe’s ARI algorithm allocates your assets based on your downside risk

Syfe uses ‘Downside Risk’ to measure the amount of risk that you’re willing to take.

In 39 out of every 40 years, a Syfe portfolio in a 15% Downside Risk category (at 95% MTL) will not lose more than 15% in a given year.

Syfe

The Downside Risk ranges from 5%-25%.

Based on the Downside Risk that you choose, Syfe will allocate your assets into the 3 different asset classes.

If you choose the highest risk profile (25%), your funds will be heavily weighted in equities.

Syfe Global ARI 25 Downside Risk

Meanwhile, the lowest risk profile (5%) will be heavily weighted in bonds.

Syfe Global ARI 5 Downside Risk

There are 11 different portfolios you can choose from, based on the Downside Risk you’re willing to take.

As such, you’ll need to decide on the Downside Risk that best suits your risk profile!

How are these strategies different?

Syfe Core focuses on maximising your risk-adjusted returns. Meanwhile, Syfe’s ARI algorithm aims to ensure that you will have the best asset allocation to suit the current market conditions.

In this way, your allocation in Global ARI will change according to market conditions. Meanwhile, your asset allocation in the Core portfolio will be relatively stable throughout.

As such, Syfe Core is more suitable if you are a long-term investor. Syfe’s Global ARI will help you to maximise your returns depending on the current market conditions.

This makes Global ARI more about maximising your short-term returns.

Number of risk levels

Syfe Core only has 3 different risk levels. This coincides with the 3 portfolios that they have:

  1. Growth
  2. Balanced
  3. Defensive
Syfe Core Different Risk Levels

The more risk you’re willing to take, the higher allocation towards stocks. If you can afford to take less risks, your funds will be allocated more towards bonds.

Meanwhile, Global ARI has 11 different risk levels. This depends on the downside risk that you’re willing to take.

Syfe Global ARI Downside Risk Levels

This gives you slightly more flexibility as you are able to choose a downside risk that bests match your risk profile.

For Syfe Core, you can only choose between the 3 portfolios that have already been determined by Syfe.

Type of Assets

For both portfolios, your funds will be invested in 3 different asset classes:

  1. Equities
  2. Bonds
  3. Commodities

Most of these of these ETFs are listed on the NYSE. Interestingly, Global ARI invests in the SPY S&P 500 ETF, while Syfe Core invests in CSPX.

Syfe Core invests in 17 ETFs

Here are the 17 ETFs that are found in the Syfe Core portfolio:

ETFETF NameAsset Class
QQQInvesco QQQ Trust SeriesEquity
TLTiShares 20+ Year Treasury Bond ETFBonds
CSPXiShares Core S&P 500 UCITS ETFEquity
EFAiShares MSCI EAFE ETFEquity
MCHIiShares MSCI China ETFEquity
XLPConsumer Staples Select Sector SPDR FundEquity
IEFiShares 7-10 Year Treasury Bond ETFBond
GLDSPDR Gold TrustCommodity
KWEBKraneShares CSI China Internet ETFEquity
AGGiShares Core US Aggregate Bond ETFBond
XLVHealth Care Select Sector SPDR FundEquity
IEMGiShares Core MSCI Emerging Markets ETFEquity
XLUUtilities Select Sector SPDR FundEquity
XLKTechnology Select Sector SPDR FundEquity
IJHiShares Core S&P Mid-Cap ETFEquity
BNDXVanguard Total International Bond Index Fund ETFBond
IJRiShares Core S&P Small-Cap ETFEquity

If you chose the Growth portfolio, your funds will be used to buy more of the equity ETFs.

Global ARI invests in 19 ETFs

Here are the 19 ETFs that Syfe invests your funds with the Global ARI portfolio:

ETFETF NameAsset Class
TLTiShares 20 Plus Year Treasury Bond ETFBond
SPYSPDR S&P 500 ETF TrustEquity
XLPConsumer Staples Select Sector SPDR FundEquity
IEFiShares 7-10 Year Treasury Bond ETFBond
GLDSPDR Gold TrustCommodity
EFAiShares MSCI EAFE ETFEquity
XLVHealth Care Select Sector SPDR FundEquity
RSPInvesco S&P 500 Equal Weight ETFEquity
XLKTechnology Select Sector SPDR FundEquity
XLUUtilities Select Sector SPDR FundEquity
XLYConsumer Discretionary Select Sector SPDR FundEquity
XLBMaterials Select Sector SPDR FundEquity
XLIIndustrial Select Sector SPDR FundEquity
XLFFinancial Select Sector SPDR FundEquity
AGGiShares Core US Aggregate Bond ETFBond
XLEEnergy Select Sector SPDR FundEquity
IEMGiShares Core MSCI Emerging Markets ETFEquity
IJHiShares Core S&P Mid-Cap ETFEquity
BNDXVanguard Total International Bond Index Fund ETFBond

The % composition of each ETF depends on the Downside Risk you’ve chosen.

There are ETFs that are found in both Syfe Core and Global ARI

You may have noticed that there are some ETFs that are found in both the Core and Global ARI portfolios!

This is similar to how the ARKK ETF has overlaps with the other ARK ETFs (ARKQ, ARKW, ARKG and ARKF).

However, Syfe Core invests in CSPX, which is an Irish-domiciled S&P 500 ETF. In contrast, Global ARI invests in the US version, which is SPY.

Syfe Core has greater exposure into China

The major difference between the 2 portfolios is that Syfe Core has a higher Chinese stock exposure due to these ETFs:

  1. iShares MSCI China ETF (MCHI)
  2. KraneShares CSI China Internet ETF (KWEB)

Most of the other ETFs in Syfe Core can also be found in the Global ARI portfolio.

As a result, Syfe Core contains a higher allocation towards Chinese stocks (~14%) compared to Global ARI (~0.4%).

If you want to get more exposure to China, then Syfe Core may be a better choice for you.

Fractional shares

Syfe manages your assets by co-mingling them with the assets of their other customers. This means that all assets are held in a single custodian account.

As such, you will be able to invest in fractional shares for both portfolios.

Syfe Fractional Shares

When you are able to invest in fractional shares, you are able to fully invest your funds. You do not need to worry about the price of each ETF!

However, there comes a risk if Syfe closes down like Smartly did in early 2020. Since your assets are co-mingled, you may not be able to sell off your fractional shares.

As such, you may not have full control over the fate of your assets!

Syfe has received substantial funding

However, you may not need to worry so much about Syfe closing down. Syfe managed to secure USD$18.6 million in their Series A funding.

They received SGD$5.2 million in their seed funding too.

Syfe Crunchbase 3

This alone doesn’t mean that Syfe is truly profitable. However, it is a good indicator that investors are confident in this company.

As such, this should give you some confidence that Syfe is here to stay!

Performance

It is hard to compare the performances between these 2 portfolios since they are rather different.

Both portfolios allocate your funds into similar asset classes. However, not all of the ETFs found in the portfolios are the same!

For example, the China ETFs may perform better than the US ETFs. This means that Syfe Core may have a better performance overall.

Moreover, the past returns can never be a good indicator of future returns. One portfolio that performs well now may not do so in the future.

Rather than looking at performance, you should be considering the investment strategy that is being used instead!

Fees

Here are the fees that you’ll need to pay when you invest in either portfolio.

Both portfolios have the same pricing structure under Syfe

Both portfolios are managed by Syfe. As such, they will have the same management fees being charged:

Total Amount InvestedManagement Fee
< $20k0.65%
≥ $20k and < $100k0.50%
≥ $100k0.40%

The management fees are pretty reasonable for a robo-advisor. It is slightly lower compared to StashAway’s fee of 0.8% for the first $25k invested with them.

You can read my comparison between Syfe Equity 100 and StashAway’s 36% portfolio to see which one is more suitable for you.

You will need to pay an expense ratio for the ETFs in both portfolios

On top of the management fees, you will need to pay for the expense ratios of the ETFs in both portfolios.

For most of the ETFs, the expense ratio may go up to 0.30%.

However, the expense ratio for both Chinese ETFs are much higher:

ETFExpense Ratio
KWEB0.73%
MCHI0.59%

This may make investing in Syfe Core more costly, especially if your funds have a high allocation towards both of these ETFs.

You will incur withholding taxes with both portfolios

Syfe Core and Global ARI invest in ETFs that are domiciled in the US. The only exception is CSPX, which is Irish domiciled.

As such, you will incur a dividend withholding tax from these ETFs.

Here are the amount of taxes you will incur:

CSPXAll other US ETFs
Dividend Withholding Tax30%15%

The dividends that you receive will be after these deductions have been made.

Syfe Dividend Distribution

The dividend withholding tax may be more hefty for China ETFs in Syfe Core

Most of the stocks that are found in the ETFs are listed on US exchanges. However, for the 2 Chinese ETFs, the assets are either listed on:

  1. US exchanges
  2. HKEX

For the stocks that are listed on the US exchanges, they are American Depositary Receipts (ADRs) of the actual Chinese stocks.

An example is BABA, the US ADR of Alibaba, while 9988 is the stock listed on the HKEX.

Meanwhile, the other Chinese stocks are listed on the HKEX as H-shares.

As such, you will incur a dividend withholding tax on 2 layers:

  1. When the Chinese stock issues a dividend to the US-listed ETF
  2. When the US-listed ETF issues the dividend to you (a non-resident alien)
MCHI KWEB Withholding Tax

China charges a 10% dividend withholding tax when a Chinese company distributes its dividends to a US ETF.

After that, you’ll still be taxed a 30% withholding tax by the US ETF!

In total, your total withholding tax will be 37%.

This will affect the total dividends that you’ll receive from MCHI and KWEB.

Although it may not be significant with a small sum of money, it may eat into your returns in the long run!

As such, you may want to consider if this is the most cost efficient way of being exposed to Chinese stocks.

You may be subject to estate tax with both portfolios

Both portfolios mainly invests in US-domiciled ETFs. As such, you may be subject to an estate tax when you pass on.

An estate tax is a tax on the right to transfer your estate to someone else.

The only exception is CSPX, which is an Irish-domiciled ETF. Ireland does not have an estate tax, unless:

  1. You or the beneficiary are Irish citizens
  2. You own property in Ireland

Syfe claims that you should not be subject to any estate tax. This is because your assets are held in a co-mingled account. Since you are not investing as an individual, you should not be subject to this tax.

However, they have added a disclaimer, which shows that they are unable to give a definite answer.

You’ll need to convert your SGD to USD

Both portfolios invest in ETFs which are denominated in USD. As such, you will incur another cost which is the currency conversion fee.

This occurs when you convert your SGD to USD to invest in these ETFs.

When you decide to withdraw your funds from either portfolio, the exchange rate may slightly affect your returns.

Verdict

With both portfolios being rather similar, which one should you choose?

Choose Core if you are a long-term investor

Syfe Core is great for a long-term portfolio. It has a specific allocation towards stocks, bond and gold that would not change much.

If you are willing to go through short-term volatilities for long term gains, Syfe Core will be more suitable for you.

However, the asset allocation is fixed. As you grow older, you may not want to have such a high allocation towards stocks.

This is because there can be a lot of volatility when you invest in stocks.

Another interesting factor is the increased exposure to Chinese stocks.

However, the higher costs of investing in these China ETFs listed on the US exchanges may affect your returns!

Choose Global ARI if you are focused on the short-term gains

If you are someone who is very focused on short-term returns, then Global ARI may be more suitable for you.

This is because the ARI algorithm aims to maintain your risk level for any economic condition. It will change its allocation to an asset class if these conditions change.

Even though the markets are performing badly, your portfolio may not be affected that much!

Conclusion

Both of Syfe’s portfolios give you a broad exposure to the different asset classes.

However, the portfolio that you choose will depend on your investing strategy and risk profile.

With 11 Downside Risk levels, Global ARI can be very personalised for the amount of risk that you’re willing to take.

However if you’re just looking for a fuss-free portfolio, then Syfe Core may be more suitable for you.

👉🏻 Referral Deals

If you are interested in signing up for any of the products mentioned above, you can check them out below!

Syfe Referral (Up to $30,000 SGD managed for free for 3 months)

If you are interested in signing up for Syfe, you can use the referral code ‘FIPHARMwhen you are creating your account. You will have your first $30,000 invested with Syfe managed for free for your first 6 months.

You will be able to save up to $75 worth of fees!

Syfe Referral

You can view more information about this referral program on Syfe’s website.


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