Source :
Apple Intelligence :
• Product Description: Mari Invest Income is a new product from Mari Bank that invests in PIMCO GIS Income Fund.
• Yield Comparison: The underlying fund pays about 5-6% yield, which is higher than the current 2.56% yield of 6-month T-Bills.
• Key Features: Managed through the MariBank app, minimum investment of S$1, no transaction or ongoing fees charged by Maribank.
• Fund Objective: Seek high current income with a secondary objective of long-term capital appreciation.
• Investment Strategy: Employs a broad range of fixed income securities to generate income and diversify risk.
• Benchmark: Tracks the Bloomberg U.S. Aggregate (SGD Hedged) Index, representing the U.S. investment grade bond market.
• Fund Composition: A significant portion (36%) is invested in Federal National Mortgage Association (FNMA) mortgage-backed securities, with the remainder in US government bonds, bank bonds, and corporate investment-grade credit.
• Safety Concerns: Investors are concerned about the safety of the fund due to the large allocation to FNMA mortgage-backed securities, particularly given the performance of these securities in 2008.
• Performance Prediction: An AI system predicts the performance of MBS in 2025.
• Investment Safety: Fannie Mae MBS are considered relatively safe investments due to their government-sponsored enterprise (GSE) status and implied federal support.
• Risk Profile: Slightly riskier than fully government-backed Ginnie Mae MBS but safer than private-label MBS, with risks including prepayment uncertainty and minimal credit risk.
• Performance Comparison: Comparable to Freddie Mac’s offerings and favored by investors seeking stable, low-risk fixed-income assets.
• Bond Fund Returns Volatility: Bond fund returns are volatile due to daily bond price fluctuations influenced by interest rates.
• Return Components: Returns from bond funds consist of two components: changes in bond prices and coupon payments (dividend yield).
• Interest Rate Impact: When interest rates rise, bond prices fall, impacting the fund’s returns negatively. Conversely, falling interest rates can boost returns.
• Distribution Yield: Approximately 5% after fees, with the underlying bonds having a 6.4% annualized distribution yield.
• Fees: MariBank charges no transaction or ongoing fees, while the PIMCO GIS Income Fund Admin SGD Hedged fund manager charges a 1.05% annual management fee.
• Endowus Fees: Buying the PIMCO GIS Income Fund via Endowus results in a 0.55% fund level fee after trailer fee rebate and a 0.30% Endowus fee.
• Fee Comparison: Mari Invest Income has a 1.05% fee, while an alternative platform offers a lower fee of 0.85%.
• Investment Risk: Mari Invest Income / PIMCO GIS Income Fund Admin SGD Hedged carries risks, including potential default of underlying bonds and mark-to-market losses due to interest rate fluctuations.
• Risk Compensation: The 5-6% coupon yield of Mari Invest Income / PIMCO GIS Income Fund Admin SGD Hedged may be a fair compensation for the risk associated with investment-grade US corporate credit.
• Interest Rate Impact: Downward pressure on interest rates benefits the fund, while upward pressure could lead to mark-to-market losses.
• Default Risk: Corporate defaults are unlikely in the absence of a severe recession.
• Investment Consideration: Investors should view the fund as a REIT equivalent with potential for capital losses when interest rates rise.
• Investment Strategy: Consider a diversified approach to cash management, including risk-free options, short-term funds, high-yield savings, and potentially higher-yield investments like Mari Invest Income.
• Long-Term Perspective: Holding investments like Mari Invest Income / PIMCO GIS Income Fund Admin SGD Hedged for a longer period allows distribution yield to potentially offset capital losses.
• Liquidity Needs: Maintain a diversified portfolio to ensure access to funds when needed.
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