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Secret To Investing Like Sovereign Funds - Don't Pay High Fees: Endowus

Updated: Oct 11, 2021

Institutional investors like GIC (Singapore's sovereign wealth fund) and Morgan Stanley get better returns because their costs are low, according to Samuel Rhee, Chairman and Chief Investment Officer at Endowus, a digital financial advisory platform.

In Part 1 of this interview (Part 2 here), Immortalize spoke to Rhee on how Endowus is bringing institutional investing to the common person.



  • 1% saving in fees means 245% additional return to your investment over a 30 year period

  • Institutional investors get better returns because their cost is low

  • Advice, access, and cost are the three pillars of successful investing


Q: Can you tell me about yourself? What were you doing before Endowus and how did Endowus came about?

Rhee: I’ve been in finance for 27 years and was at Morgan Stanley for 17 years, holding various roles in Hong Kong and Singapore.

The last roles that I held was CIO (Chief Investment Officer) and CEO (Chief Executive Officer) for the Asian investment management unit and my job included asset allocation across the efficient frontier for sovereign wealth funds, global pension funds, and other institutional funds.

Struggle With Personal Investment

A friend of mine introduced me to my two co-founders, Gregory Van and You Ning Sun, and we met to chat over coffee. During the chat, we quickly realized that there is a common problem for everyone – we all struggled to invest our own money efficiently.

For me, when I was investing professionally for others, I run it properly. But when it comes to my own private money, I used to do what every retail investor does, which is going after the latest fad or punt some stocks.

I quickly realized that this is not the right way to invest long term, and I completely revamped my portfolio.

Difficulty in Investing CPF

Greg and You Ning had been talking about the CPF system and how onerous, difficult, and expensive it is to invest it into financial markets with CPF monies. It’s so important because it’s tied to important issues like retirement. We decided that these were problems that we needed to solve.

(CPF, or Central Provident Fund, is Singapore's mandatory social security savings scheme)

Q: What is the problem that you are trying to solve?

Rhee: We want to make saving and investing easier today so that we can secure our future tomorrow. Solving for retirement is the biggest generational challenge we’ll likely face and where my passion lies. We need to solve this and not enough is being done.

Living Longer But Poorer?

Take an ageing society like Singapore where average life expectancy is now well into the mid-80s and that is average. This means that 50% of the population are living longer than 85, to 90 or 100 years old.

If people retire at 65, which is the traditional number that everybody has in mind, are you going to have enough saved up without sacrificing the quality of life that you need or even avoid poverty?

The Banking Fortress

It's not a Singapore issue, but an Asian societal challenge. People don't invest very well. The banks have an inordinate amount of power and hold on the distribution of wealth and financial products, and they charge way too much for it.

As a result, lack of advice, lack of access to great products, and high costs led to poor outcomes, meaning people will not be able to have enough saved up for their retirement.

Holy Grail of Investing

People need to take matters into their own hands. Rather than punting all their savings in stocks or crypto, they need to save and invest earlier the right way. There is a right way to do it.

Advice, access, and cost are the three pillars of successful investing. At the moment, it’s just not in existence, especially for individual investors.

Sovereign Fund Advantage

Institutional investors like Morgan Stanley or sovereign wealth funds like GIC have all those things. If you have a lot of money, say $10, $20, or $100 million, then you get private bank’s good advice. But people that fall through the cracks are the people who need good advice the most.

Even for high net worth individuals, they do not get the advice that they need or deserve and are still paying very high cost. They do better than retail investors in the sense that they have better access, but the advice is not that great. They get pushed products.

The Power of Leverage

The kind of private banking service that people normally receive is usually a product. Either you get sold, “Hey, this is an ESG fund that’s doing well,” or “This is a pre-IPO, you should get it,” or buy whatever is the latest. Banks push leverage.

Leverage is the biggest weapon that private banks have. Take all the investments, add leverage and you get a higher percentage yield. That’s not advice, that’s pushing a product at high cost – and we do not even ask whether it is a suitable investment for their long-term financial plans.

Secret To Institutional Investing

The whole idea of Endowus is to bring institutional investing to the common person. Institutions only win out because their cost is so low.

When Morgan Stanley or GIC invest, they do not pay 2% sales charge and ongoing fees and the fund managers give it to them at 20 or 10 basis points (1 basis points equals 0.01%). They get extra special pricing because they're bigger, and that's what we're doing by accessing institutional share classes and institutional funds. We are group buying for all our customers.

Differential Treatment

Take PIMCO Income Fund, one of the more popular fixed income products, for example. It has an institutional version and a retail version, and we offer the institutional version of the fund on our platform.

The fund management fee for the retail version is about 1.5%. We get it at 0.5%. GIC and other sovereigns would obviously get lower price than us, but maybe one day, we can get to a scale where we can compete with them, and we can offer our clients even lower pricing.

Compounding Impact of Fees

Return is just the flip side of fees. If you save 1% in fees, that is 1% better return for you. If you compared an 8% return, which is what global market returned long term and then shave off 1% to compare that to a 7% return, then that small difference of just 1% over 30 years compounds to 245% difference.

Q: Who is Endowus’ target audience?

Rhee: It’s every Singaporean individual investor, which includes both retail investor and high net worth investor. It could go from $1,000 at DBS to $10 million at UBS and those with CPF & SRS preparing for a better retirement.

(SRS, or Supplementary Retirement Scheme, is a voluntary scheme to encourage individuals to save over and above their CPF savings)

Insufficient Retirement Plan

We tried to get CPF from the get-go because it was the most important piece of the pie for most people. CPF is a great social security system, but it's not a pure retirement pension program. Only the CPF Life component is pension-like but it’s not made to be a complete retirement plan.

(CPF Life, or CPF Lifelong Income For The Elderly Scheme, is a national longevity insurance annuity scheme that provides individual monthly payouts regardless of how long the individual lives)

Q: If there's one advice you would give anyone looking at CPF investing, what would that be?

Rhee: Get started. You have to invest your CPF and be prepared for retirement. That's the biggest problem.

One mistake people make is to compare CPF returns with fixed deposit and say fixed deposits give them nothing, and so this is better than fixed deposits. But your funds are being locked up for, say 30 years, so you should aim to do better than risk-free returns.

Best Post-Retirement Risk Free Rate

Post retirement, you may want to keep the money in CPF, because then the 2.5% that CPF gives does become meaningful. Then, whenever you need the money, you take it out from the investment, put it in the 2.5%, and then keep it as a liquid cash account that you can take out anytime you want.

It's the only place that's going to give you 2.5% risk free, in your retirement, when you need cash.

This interview has been edited for length.

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Disclaimer: Nothing in this article or site should be construed as providing legal advice or advice of any sort. The information provided are general in nature and may become inaccurate over time. Please consult a professional for advice.

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