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Comparing the Performance of Some Robo Advisers (Full Year 2020/2021 Update)

5 months ago, I updated readers on how the performances of the more popular Robo Advisers.

I started the tracking probably around 14 July 2020 and thus, I have about 1 year of data.

I think it is good to take a snapshot of how things are and make some notes. Will be comparing them, perhaps also against the global factor etf and maybe something more…

Let’s see how much energy I have.

The Robo Advisors Portfolio That I Tracked

I wanted to have a certain sense of how some of those portfolios were performing.

I also wanted to see some of the unique portfolios feature certain Robo Advisers advertise at work.

I chose the highest-risk portfolios for the portfolios where available.

I would also include a couple of ETFs that tracked the MSCI World and Bloomberg Barclays Global Aggregate Bond Index.

So here are the portfolios I tracked:

  1. MoneyOwl’s Equity Portfolio: 100% Equity in Dimensional Funds, which are tilted towards value, small and profitability factors.
  2. Endowus’s Very Aggressive Portfolio: 100% Equity that was all in Dimensional before they moved a sizable to Infinity 500 (which is an index tracker with S&P 500)
  3. StashAway’s 36.0% Risk Portfolio: This is their most aggressive portfolio based on ERAA® (Economic Regime-based Asset Allocation). If I understand this regime based asset allocation, the correlation of asset classes will keep changing, so Stashaway has a way of adjusting their allocation so that they can risk-weight the portfolio with different instruments so that you can capture the return and only take a max downside of 36%.
  4. Syfe Global ARI: Syfe’s risk parity solution. A mixture of equity, bonds and gold. When the volatility rises, the portfolio should go to bonds and gold and when risk subsides, the portfolio should go back to equity. This should give you a smoother experience. I have selected the option where the portfolio will be risk manage for me. Currently, the portfolio is 63% weighted to equities, with the rest bonds and gold. This portfolio will close down soon due to poor reception. You can read more about it here.
  5. Syfe REIT portfolio with Risk Management: I realized that I have totally misinterpreted this portfolio. I chose a portfolio that incorporates REITs with government bonds. The portfolio is not smart enough to mitigate the downside volatility during volatile times and step up its REIT allocation when the coast is clear. So what we have here is a half bond half REIT allocation.
  6. Syfe Equity 100: The fabled Smart Beta portfolio that can time the factors so that they can capture the factor premiums when they appear and disappear. You can read more about my initial thoughts of the Equity 100 portfolio here and my thoughts about its performances here.
  7. IWDA: This is a London-listed, Irish domiciled UCITS ETF that tracks the MSCI World Index. Very popular among DIY Investors. ETF page here.
  8. AGGU: This is a London-listed, Irish domiciled UCITS ETF that tracks the Bloomberg Barclays Global Bond Index. Not so popular among DIY Investors due to investors aversion to bonds. Investment-grade corporate bonds of an average 7.4 years duration. ETF page here.
  9. A Global Balanced Index Portfolio: I added this portfolio in this post as it will be good to see how a portfolio more suitable for a more risk-averse investor would do. 60% made up of IWDA and 40% made up of AGGU. Standard deviation (portfolio volatility) would be closer to 10%. Based on historical data, 68% of the historical annual compounded returns will fall between -3, -4% to +17, +18%.

#1 to #6 are in SGD while #7 to #9 is in USD. USD have weakened against SGD by 2.24% during this 1-year period. So I would need to personally adjust the results.

How did the Robo Advisers Portfolios perform during the past 1 year?

The tracking period of the portfolios starts somewhere from 14 July 2020 to 11 August 2021. That is a span of 388 days.

We measure the performance by tracking their money-weighted return as we hold the portfolio over time with the XIRR.

XIRR is like finding out the annual compounded “interest yield” on a stream of uneven cash flow. It is good to measure how your investment is doing if there is a lot of cash flow deployed and you got dividend income and sales here and there.

A better way to measure here would be time-weighted return or TWRR for short.

But because I am not adding any additional capital XIRR is almost equal to TWRR. You can read my post Comparing Money-Weighted Returns Versus Time-Weighted Returns to know more about the intricate difference between the two.

The chart below shows the XIRR for each of these portfolios over time:

Performance comparison of robo advisers portfolios from Jul 2020 to mid August 2021.
Click to view a larger chart.

If we compute the XIRR that is less than a 1-year timeframe, it would usually be a crazy big figure. So I had to “massage” the XIRR to adjust and annualized it better.

You can look at each point as the internal rate of return from the start to that point.

For example, if the XIRR plotted for Syfe Equity 100 on the 6th of Feb is 14.78%, it means from the start of 20th July 2020 to 6th Feb 2021, the “interest rate earned” is an annualized 14.78%.

The portfolios ended with the following returns, ranging from the highest in the chart above to the lowest:

  1. MoneyOwl’s Equity Portfolio: 35.9%
  2. Endowus’s Very Aggressive Portfolio: 33.7%
  3. IWDA: 34.4% (adjusted for currency, this should be 32.2%)
  4. Syfe Equity 100: 22.8%
  5. Balanced Portfolio: 20.9% (adjusted for currency, this should be 18.7%)
  6. Syfe Global ARI: 14.1%
  7. StashAway’s 36.0% Risk Portfolio: 10.1%
  8. Syfe REIT portfolio with Risk Management: 4.1%
  9. AGGU:0.4% (adjusted for currency, this should be -1.84%)

The following table gives an end-of-the-month view on the evolving performance of the portfolios:

Click to view a larger table

Here are some comments to make about the portfolios.

You should not judge which Robo adviser or which portfolio to invest in based on 1-year performance.

We have all been to school.

Basing your decision to invest in a particular Robo adviser based on such a short time frame is almost equivalent to judging your academic amplitude during your Primary 1 days.

It is almost laughable.

Tracking these performances is to have a basis for qualitative evaluation.

Performance data can be a fudge by taking a period where it looks very favourable to you. And leaving out periods that you underperform.

Your financial advisers, financial planners, investment professional, the sales managers may be guilty of doing this.

Some strategic portfolio allocation needs a long time to see it shine. Unfortunately, we do not have time but that is one of the main challenges in investing.

You should choose to invest based upon:

  1. Why the portfolios are constructed this way, how are the portfolios are constructed, and how do they give you the best chance to capture the greatest portfolio returns over the long run. This means that you need to understand what the Robo advisers are doing. By investing in them, you are saying you understood their strategy, believe in that strategy for the long term.
  2. The execution of their strategy. It is good to talk about a good game, it is totally different when it comes to execution. Some strategies do not work so well because they are not easy to execute in real life or cost a lot to execute.
  3. Which portfolios will suit your risk profile. Some of the portfolios above are constructed to give lower volatility (Syfe ARI, Syfe REIT with Risk Management, Stashaway 36% portfolio to a certain extend.). The Robo advisers are balancing returns with volatility and you should not evaluate your suitability purely only on returns.

I can put out the above three-point shit but I suspect folks still dunno what I am talking about.

Grouping the Evaluation of the Portfolios

MoneyOwl’s Equity, Endowus’s Very Aggressive Portfolio, Stashaway’s 36% Risk Portfolio, Syfe Equity 100 portfolio should be compared as the same animals with IWDA.

Syfe REIT and Global ARI should be more boutique solutions. Both should be evaluated against the Balanced 60/40 portfolio as the risk level is about the same.

The AGGU is to give us a sense of how the low-volatile bond-like returns are. Historically, the AGGU would do VERY respectable even against a pure MSCI World ETF like the IWDA.

Why the Portfolios performed this way

This one year has been characterised by:

  1. A general rise in equities.
  2. A general small fall in bonds.
  3. The value premium showing up for a large part of the year.
  4. Growth stocks being very volatile.
  5. Gold not doing so well.
  6. China, emerging markets, especially the internet and technology stocks doing very well from Jan to March 2021 and then going to shit.
  7. Smaller companies doing very well in the first half of the year before going nowhere.

What happens in equities, bonds, gold and the factor premiums (value, small) drive the difference in the portfolios.

AGGU, Syfe ARI, Syfe REIT with risk management suffered because bonds generally did not do so well.

MoneyOwl and Endowus portfolio did well because the value premium was dominant and for some parts the smaller companies were dominant.

StashAway’s portfolio suffered because they had China Internet stocks (the KWEB ETF) and Gold as dominant allocations.

The Global Balanced Portfolio actually did rather respectable.

Syfe’s Equity100 targets growth, low volatility and large-cap factors. Thus, they underperformed (value did better than growth, smaller companies for some time did better than larger companies, low volatility stocks have not been good during this period. More on this later in the factor comparison)

Some of these portfolios have more strategic allocations and the Robo advisers should not change their ETF or unit trust components much:

  1. MoneyOwl
  2. Endowus
  3. IWDA, AGGU, Balanced Portfolio
  4. Syfe REIT
  5. Syfe ARI

They live and die by their allocation. There are going to be times when the value premium don’t show up or the small premium don’t show up. Or show up big time. When the premiums do not show up MoneyOwl and Endowus will do worse than IWDA and if they do, these portfolios will continue to do well.

When the low volatility and high dividend premium shows up, or when volatility picks up, the Syfe REIT, Balanced portfolio, AGGU and ARI will shine.

The other portfolios, such as Syfe Equity 100 and Stashaway are more active.

They are managed via rules, either executed systematically or by humans.

But essentially, both Equity 100 and Stashaway and to a great extend Syfe ARI investment philosophy, inner workings and execution is a black box.

When it is a black box, it is very difficult to verify.

When it is difficult to verify, we can only judge them by their performance. And if their performance sucks, you better ask them to explain and I hope you are able to understand their explanation.

Unit trust used to have a prevalent problem.

Fund managers can paint a very nice qualitative picture about what they do, and those of us in the industry know that some of their execution is very different from that picture.

They are quite opaque, and there was almost no clear communication with investors like yourself.

So when performance is poor, you do not know whether its because some of the premiums not showing up or its poor execution (or some sort of baloney they give you)

Black box strategies are like this.

Comparing the Robo Advisers Portfolios to Low-Cost Global Smart Beta ETFs

So we know that some of the better performers were:

  1. MoneyOwl portfolio – 35.9%
  2. Endowus portfolio – 33.7%
  3. IWDA (MSCI World Index ETF) – 32.2%

MoneyOwl and Endowus’s portfolio is tilted towards the small, profitability and value premium.

Based on the funds used, the way to look at them is not that they are very tilted towards smaller and cheaper companies but within the larger-cap space, they tend to lean to the smaller and cheaper companies.

At the end of the day, fund managers in a unit trust, these Robo advisers portfolios, you and me are just trying to capture as much:

  1. The returns for taking the risk above a risk-free bond.
  2. Different factors/risk premia/risks that historically show us that they will reward us for taking those risks.

All three portfolios are very globally diversified and thus they aim to capture market returns.

Thus, their performance looks rather similar. Except that perhaps MoneyOwl’s portfolio is most factor-tilted, thus the performance is better.

I thought it a good idea to check their performance against quantitative low-cost Smart Beta ETFs which capture different factors.

Related: Intro to Smart Beta Passive Investing for Singaporeans

On the London stock exchange, you can invest in low-cost, Irish-domiciled factor ETFs easily. Geographically, they give you exposure to MSCI World, MSCI Europe, MSCI USA and some MSCI Emerging markets.

But for today’s comparison, we will focus on the ETFs that targets factor premiums within the MSCI World.

Here is the performance, adjusted by currency from 14 July 2020 to 11 Aug 2021:

ETFFactorXIRR Return (adjusted for Currency)
iShares Edge MSCI World Multifactor UCITS ETFValue, Size, Quality, Momentum35.0%
iShares Edge MSCI World Momentum Factor UCITS ETFMomentum27.3%
iShares Edge MSCI World Value Factor UCITS ETFValue32.7%
iShares Edge MSCI World Minimum Volatility UCITS ETFMinimum Volatility17.2%
iShares Edge MSCI World Size Factor UCITS ETFSize35.4%
iShares Edge MSCI World Quality UCITS ETFQuality35.4%
iShares MSCI World Quality Dividend UCITS ETFDividend20.9%

One thing we realize is that most of their returns are very respectable.

And this is a common theme: We are trying to capture the market return above the risk-free rate.

You are putting your money at risk, and hoping the market rewards you for taking the risk.

All these index ETF and smart-beta/factor ETF are mechanical soul-less implementation. Less human inputs. And the performance generally bunches together.

If you have a unit trust or a boutique fund managed by a human, it is best to ask whether their performances measure up to these soul-less performances.

What you will notice is that the value, size and quality ETFs did better than MSCI World.

And these are roughly the same factor elements that MoneyOwl and Endowus portfolio tries to capture.

So it is not surprising that MoneyOwl and Endowus’s portfolio performed this way.

It also shows that what they do is not a black-box, you can verify if they are smoking you by comparing the performance against these factor ETFs.

I have a soft spot for the Multifactor ETF because it’s like a mesh of those few factors. Its performance is better than the MSCI World during this period.

There were question marks over this multi-factor ETF’s execution but this year, it looks good. Objectively speaking, for this period, it did not do as well as Dimensional’s Global Core Equity (38.9%) (which should be a good comparison against this Multifactor ETF) but my sensing is half the time Dimensional will do better half the time this Multifactor ETF will do better.

I also like the minimum volatility ETF. The performance looked muted and that is how things are. Things do not always look rosy.

The minimum volatility ranks the MSCI World stocks based on those with lower BETA and at the same time carves out 300 of these stocks that have low correlation with each other.

Given these characteristics, it has a risk profile that is like a 60% equity 40% bond portfolio but with potential for MSCI World return.

It is like a cheat code factor.

But anyway it’s not doing too well but I have always had an eye for it.

Comparing against Providend’s Strategic Portfolios

Lastly, a short word for the colleagues at Providend who reads this (so that I do not have to do double work and get to enjoy my weekend).

We run two strategic portfolios at Providend. One is index focus that tries to capture market risk. The other is an enhanced index portfolio tilted towards small, value, and profitability.

Each portfolio has different risk levels. They are not too different from what you see at MoneyOwl and Endowus.

If we measure our 100% equity-equivalent portfolios, the index focus portfolio will do 31.1% in XIRR over this period.

That is 3% lower than IWDA (which is the right measurement).

The enhanced index portfolio did 39% in XIRR.

The reason for the good performance is not surprising. Again, it tilted towards small, value factors which did well during this period.

The difference is that in the portfolio, we have a “small booster” that did 63.2% during this period.

This small booster looks good now, but if you fast forward to the pandemic it causes quite a lot of grief.

Greater returns come with greater sacrifice (in the form of volatility).

The Last Word

Again, I would like to say, judging solely by 1-year performance is stupid.

This is to encourage a conversation with your adviser or investment manager about why the performance is the way it is so that you can understand better how it works.

I think we would see a different view as things progress.

Syfe ARI is gonna be rolled into their core portfolio, so I will stop tracking this… or maybe I will roll into their Balanced Core and continue with it.

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Tuesday 9th of November 2021

To learn more, I want more details about these Robo Advisers. Could you please send me the data by which you drew the chart of the XIRR for each overtime?


Sunday 24th of October 2021

how is Syfe Reits + (without Risk management) performance compared to others, if plotted on your chart? also is the xirr computed with dividend reinvested?


Tuesday 26th of October 2021

Hi FC, I would not know that since I did not track that portfolio


Sunday 15th of August 2021

The reit with risk mgmt did help to reduce drawdown in March 2020.

But then their timing signal could not process the recovery quick enough in a timely fashion. Maybe their system overly focused on things like the VIX (which remained high for a long time) instead of simply focusing on prices & volume.

I took a look last week & the risk managed Reit still had 47% in bonds.

The global ARI portfolios finally responded to the past 16-month recovery with increase & even overweighting of equities in the last 2 months. But it's too little too late with probably many customers already jumped ship to other portfolios.

With so many talking about the death of 60:40, it's funny to see it still performing ok over the past couple years.

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