Endowus - New option for investing CPF monies

I recently attended an outreach session by Endowus, a relatively new investing platform. It offers an interesting additional option for investing CPF monies (they also do cash portfolios, but this post will focus primarily on CPF) for Singaporeans, and I think it's worth considering.

If you are keen to sign up for an account with Endowus, do consider using my referral link which enables both of us to have $10,000 of funds advised free for 6 months (a $20 value, to be precise). I receive no compensation from Endowus or any other party in writing this post.

Investing CPF - why even?

I shed some light on my revised views of the CPF in an earlier post, including my re-think of the CPF Ordinary Account (OA) as a quasi-cash "Housing Account" while the Special Account (SA) functions as the primary retirement vehicle. One of the questions I raised was whether 2.5% (the current OA interest rate) is a reasonable rate of return for the long term, and I briefly commented that I was not very keen on the CPF Investment Scheme (CPFIS). That may change with Endowus coming into the picture...

Meaningful statistics on CPFIS are like hidden pieces of a treasure hunt on the CPF website, but some broad observations:

• 4.0 million CPF members as of September 2019
• 940,000 CPFIS-OA members as of Q3 2019 (and a further 297,000 CPFIS-SA members, which I won't be focusing on for the time being)
• "Total cost of current holdings in CPFIS-OA" has been steadily dropping from 2008 to 2016, and the drop seems to have slowed down, but the graph by CPF is actually very misleading because the x-axis is inconsistent (originally by year, then by quarter). 

This means that less than 1 in 4 CPF members has opted in for the Investment Scheme for their OA, not even taking into consideration that some CPFIS-OA accounts may have been set up but were never used. Even assuming that all CPFIS-OA accounts are active, I find an average of $17,500 of "cost of current holdings" per account as of Q3 2019, which doesn't seem high and is significantly lower than ten years ago ($29,250 in 2009) or even five years ago ($22,000). In fact:

• Out of the $142b in CPF members' OAs, only $16.6b (less than 12%) is invested as of Q3 2019, as compared to a whopping 37% in 2009 ($26.15b invested out of $70.6b) 

Clearly, popularity of the CPFIS-OA appears to be waning, and I think this can be attributed to three main reasons:

1. Perception that 2.5% p.a. interest rate is "good enough". Relative to deposit account interest rates which have been nowhere close to even 1% for recent memory, 2.5% risk-free seems to be attractive, something which I do not deny.
2. Hurdles in investing CPF monies. In addition to the hassle of setting up CPFIS itself, there are quite a number of fees involved, some of which are frankly absurd. For instance, DBS charges $2 per counter per quarter, subject to a minimum of $5. So that's instantly $20 of "service fees" per year even if you have just one counter, and it creeps up to $80 per year for someone attempting to diversify with 10 counters. I have no idea what "services" are actually offered.
3. Fear. CPFIS may be subject to losses, and there is no guarantee of principal by CPF. Poor investment decisions could lead to significant losses, then panic, then withdrawal of funds (and realisation of those losses just as the market recovers...) For CPF members who continue to see both the OA and SA as their retirement vehicles, it is understandable to have a low degree of tolerance towards such losses, but if one adopts my suggested lens and sees the SA as the primary retirement vehicle, then sensible investing of CPF monies, in particular the OA, could yield positive returns while managing the impact of any volatility on retirement planning.

What does Endowus bring to the table?

In a nutshell, it is a low(er) cost method of investing CPF monies in a diversified unit trust portfolio, with a stock-bond allocation of the investor's choosing. Endowus operates under an MAS Financial Advisers license (rather than a Capital Markets Services license), so never directly handles clients' money. All funds and holdings are parked with UOB Kay Hian in the client's name. For CPFIS-OA members who use Endowus, the following three fees apply:

• Access fee: Endowus selects best-in-class unit trusts for the various portfolios (e.g. 60/40 or 80/20) and also handles portfolio creation and rebalancing. For their services, they charge an access fee of 0.40% for assets under advice (~AUM).
• Fund-level fee, which will also apply when buying a unit trust through other platforms (e.g. Fundsupermart), except that Endowus rebates trailer fees. Basically, out of the $X that a unit trust fund manager collects, a proportion is paid to the typical platform as a trailer fee (sort of like a commission), and the remainder, which we'll call $Y, is kept by the UT fund manager. Since Endowus promises to rebate 100% of trailer fees, the client effectively only pays a fund-level fee of $Y, instead of $X.
• Agent bank charges, which apply to any sort of CPFIS arrangement. Basically, the "service fees" I mentioned earlier. One key advantage under Endowus is that because the client is holding one portfolio, the client only pays one quarterly service charge overall, even though he owns multiple unit trusts within that single portfolio. This is a clever workaround to reduce (although not totally eliminate) the somewhat frivolous fees charged by DBS, OCBC and UOB. 

For purposes of illustration, we can use the funds which are part of Endowus's CPF portfolio as of writing (end-Nov 2019):

• Schroders Global Emerging Market Opportunities Fund
• Natixis Harris Associates Global Equity Fund
• Lion Global Infinity US 500 Stock Index
• First State Dividend Advantage
• Legg Mason Western Asset Global Bond Fund
• Eastspring Singapore Select Bond Fund
• United SGD Fund

Observation 1: Assuming that all 7 funds are available to retail investors, establishing a DIY 7-fund portfolio would incur 7x of the agent bank quarterly service fee, and any buying/selling of the funds (e.g. for rebalancing purposes) would incur agent bank transaction fees as well. Under Endowus, it will be counted as one portfolio, hence only incur a single quarterly service fee, and rebalancing-associated costs are not borne directly by the client but instead are covered by the separate 0.40% access fee.

Observation 2: Using the Schroders Global Emerging Market Opportunities Fund as an example - the annual expense ratio is around 1.66%-1.68%, which is what an investor would incur if owning the fund directly. But because Endowus rebates 100% of the trailer fees, this is brought down to 1.08% (source), and even after including the 0.40% access fee, the total of 1.48% is lower than the direct-purchase option.

Observation 3: Interestingly, observation 2 does not always apply - the Legg Mason Western Asset Global Bond Fund has an annual expense ratio of 0.87%, and through Endowus, the fund-level fee after trailer fee rebate is 0.57%. After including the access fee, the total of 0.97% is not as competitive as buying this fund directly. Endowus appears to have the comparative advantage in equity funds rather than bond funds, which is not surprising given that equity funds usually have higher fees to begin with (and hence can offer large trailer fees). Investors may wish to consider this when choosing their portfolio allocations.

Endowus is pretty upfront in acknowledging that the best way to preserve CPF capital is to stick to the risk-free 2.5% p.a. offered by the OA (assuming it never changes). Endowus is focusing on appealing to CPF investors looking for higher returns, by offering a fuss-free option supported by a non-intimidating user interface, and access to certain types of funds which may not be easily available to retail investors. Sure, the model does resemble that of a fund-of-funds setup, but I think the commitment to rebate 100% of trailer fees plus the very reasonable access fee of 0.40% make a very good value proposition.

Who will Endowus be suitable for?

I've initiated my account setup process and am waiting to explore the platform a bit more, but in the meantime a big question in my head is: what profile of CPF investor would Endowus be best-suited for?

My quick sensing is that young investors are unlikely to have much CPF OA monies available for investment, because a large majority of them may prefer to use CPF OA for housing needs, and still have to put up a $20,000 minimum balance before being able to invest the rest of their OA. Yet, these younger investors might be more receptive to what Endowus offers as an option to invest CPF monies. Older investors probably have larger CPF balances on average, yet may be a little harder to convince, because they might feel more reassured with "big bank" products, i.e. something offered by DBS, OCBC, or UOB, and may be willing to tolerate the higher fees as a trade-off for the reassurance they get investing through one of these better-known channels.

It'll be interesting to guess at what is Endowus's strategy here. While they also offer cash and SRS portfolios, their key comparative advantage at the moment is being able to offer a CPF portfolio, a feature which is currently unmatched by the competition. Is the investor base ready to come to the table with a new-found appetite for investing their CPF monies? How does one identify the "total addressable market" in this scenario? Will leveraging on the UOB Kay Hian tie-up help to reassure some would-be investors?  Time will tell, but certainly I think this is a step in the right direction. Having more options is always better than having few or none, and based on what I've heard, read, and observed, Endowus provides a very compelling option for investing CPF monies.

Endowus (and investing in general) is not about generating out-sized returns; leave that philosophy for a small, high-risk portfolio if you absolutely must, but don't let that active, risky portfolio form the backbone of your financial planning. Instead, build on what is often viewed as restriction - CPF monies are locked up and one cannot use them other than for housing (OA) and medical costs (MA) - and flip the perspective over to the positive, e.g. lock-in until age 55 means peace of mind, if done correctly from the start. In that context, Endowus potentially plays the role of a smartly-rebalanced investment/retirement platform suitable for CPF members, and is a first-mover in this untapped area.

[If you are keen to sign up for an account with Endowus, do consider using my referral link which enables both of us to have $10,000 of funds advised free for 6 months (a $20 value, to be precise). I receive no compensation from Endowus or any other party in writing this post.]

Post-edit: While there is a strong temptation to compare this to the DBS digiportfolio, I have consciously refrained from doing so since the latter is not a CPF-eligible product. I may touch on it in a separate post on cash-based investment options.

Back to business

Okay, so things have been dormant for a bit as I've had to focus on a couple of different things through the year and this blog went on the backburner. As I find myself with a a bit of time as we approach year-end, I thought it would be best to go ahead and jot some reflections. Penning down some thoughts is generally good for holding oneself accountable, validating past hypotheses, and also sharing my perspective with readers. So here goes...

The final earnings season of most US stocks is pretty much out of the way, and I had a short-lived period of being happy by taking profits off an earlier trade, which evaporated the very next day due to some disastrous results associated with a different counter.

PZZA - the oven gets warmer

The joy was provided by none other than Papa John's (PZZA), a pizza delivery chain fairly well-known in the US. I started a long position in May and was pleased to know that Starboard Value, an activist hedge fund, was looking to shake things up in the company (Starboard's claim to fame is its success turning around Olive Garden under Darden Restaurants - there is a rather dramatic deck of slides relating to this effort). Following some good results, my resting sell order cleared pre-market, and although the share price was to go up a little further over the course of the day, I was quite content with having locked in a 20+% return over a short period of around six months.

Frankly, my read is that the counter still has upside, but with trade uncertainties jumping from "nearly signed it!" to "nope, no deal!" every other week, I think it was good to take some money off the table for this consumer discretionary counter, since this sector is fairly exposed to economic sentiment (although this may depend on whether one views pizza as a normal good or an inferior good from a microeconomics point of view).

RLH - disaster!

The very next day, Red Lion Hotels Corporation (RLH) announced results which can only be described as a disaster, unfortunately wiping out my gains on PZZA and then some (quite a bit actually). It is almost unheard of for a share price to collapse by 50% except in the biotech/pharma sectors, or where there is fraud/corruption, but that's the scale of RLH's drop. I had been tracking the share price closely over the past couple of months and had already reduced my exposure slightly, but I never anticipated that the market would react so negatively to the results (and the CEO's departure ). I listened to the earnings call recording in an attempt to decipher what was going on.

Basically, there were some headwinds in the sector, and the results fell short of expectations. There were also quite a number of franchise agreement terminations, which is bad for the business as RLH moves towards an asset-light model. The remaining owned hotels have also taken quite a while to be sold, something which Vindico Capital issued a pointed shareholder's letter about, but already known prior to the earnings release.

Based on an earlier property count (as of 30 June 2019, from Red Lion's IR Website), it appears that the terminations are largely from the select-service category, from America's Best Value Inn and Canada's Best Value Inn, as well as from Knights Inn (which RLH acquired from Wyndham in 2018). Franchise terminations are part and parcel of the franchise business, and from the earnings call it didn't sound like the terminated properties were gravitating towards a specific competitor. I think RLH has some work to do (possibly streamlining the line-up of brands under its portfolio) for better operational efficiencies.

While I wish I had reduced my exposure further before the earnings call, there's nothing I can do about it now. As it stands, the significantly-reduced market cap of RLH could make it an M&A prospect given its portfolio of over a thousand properties representing nearly 80,000 hotel rooms. I'll have to watch this closely in the next couple of months, and hopefully the search for a replacement CEO ends in an outcome that is well-received by the market.

So what now

My portfolio YTD returns (blue line) took a sharp dive, and it doesn't look like I can come anywhere close to the stellar performance of the S&P (red line, 25% YTD) or even the world index (green line, 20% YTD). If not for the freak incident for RLH, I was tracking the world index pretty well. I take some comfort in having outperformed the Singapore index (purple line), and frankly, finishing the year with around 15% returns is not too shabby.

I've pared down some holdings and am looking towards a couple of anchors to drive returns over the next couple of months:

• AMD, with close to 100% returns YTD, is poised to play a sort of David vs Goliath role against both Nvidia and Intel. Exciting times!
• MU, perennial favourite of mine, and previously mentioned on this blog.
• SQ, currently in the red but holding out for M&A potential - could Google or Apple swoop in?

I'm definitely overweight tech, but its the sector I'm most comfortable with. The long-drawn 787Max issue seems to be almost ignored by the market now, and it's interesting that airlines (even those which had large Max fleets like LUV) didn't get impacted too badly, but I'm sitting on the sidelines for now.

As a final point, and also to allude back to an oft-repeated mantra that investors should think long-term, I managed to cull this chart off my IB reports showing my historical performance (since I started using IB) versus the same four indexes mentioned above. Over here, I'm still ahead of the S&P (if only just, and largely due to pulling way ahead in 2018), so this is perhaps a #humblebrag. Nonetheless, I guess it was always better to have started earlier, and I'm glad I did!

Event: Stashaway Academy - Market Outlook 2019

A Wednesday evening talk at the newly-completed Frasers Tower on Cecil Street.

As I approached the ground floor lobby, the public announcement system played a pre-recorded message that the cause for a fire alarm (presumably triggered just a few moments before) was being investigated. For office workers at the end of their workday, there was no cause for panic, and an intermittent trickle exited the building, headed in various directions, no different from a typical workday routine.

Alas, a long line had formed at the security counter, with more than 20 people waiting to obtain a visitor pass. My guess was that most people were here for the same event. I joined the line. Progress was excruciatingly slow, but I still had full intention of attending this talk which I signed up for a while ago. My patience was worn gradually as ten minutes of waiting in line only yielded a few metres of forward movement in the human queue. One of the event organisers apologetically appealed to the participants for their patience, and his frustration was palpable from his comment to the effect that this was likely the first and last time they would use this space for any of their events.

Finally, there was some executive intervention - presumably some negotiations with building security that playing it by the book wasn't working out very well, and that something had to be done to remedy the unacceptable situation. We were allowed to enter the barrier gates leading to the lift landing area, where batches of us were then ushered into commodious high-ceiling elevators bound for The Executive Centre, a mixed-use space on the 17th floor of the building.

At risk of sounding slightly quixotic, it was perhaps an apt metaphor of an investment paradigm that would be pointedly relevant to the subsequent talk -- the fire alarm representing the constant barrage of media claiming to foretell the impending arrival of the next big recession and absolute financial apocalypse; the slow exodus of tired office workers being those who experience the misfortune and jadedness associated with selling low after buying high, figuratively coming back down to the ground (and literally as well, from their lofty offices high above).

The metaphor flows easily into the time spent waiting in line for security -- this represents the patience demanded of all who seek to be contrarian investors, the minority group who look to enter the building (investment opportunities) when everyone is being told by the fire alarm (the media) to leave. And when the time was right, the gates opened, the bulls came charging in (you got that), and all of us went up, up and up ... to level 17, where we were rewarded for our patience and willingness to stick to earlier convictions with a good sharing session in how to look at 2019 by Stashaway.

It serves little purpose for me to regurgitate what Freddy Lim, Stashway's co-founder and Chief Investment Officer, had to say, given that I've already painted the picture of the paradigm with the preceding paragraphs (double score for alliteration), but I'll leave you with three quick thoughts:

Unlike what you might be led to believe if you follow the media closely, we're not in a recession. Not yet, at least. I'm intending to follow the Conference Board's Leading Economic Index closely through 2019, and for the latest update the trend points towards continued positive growth, albeit much-curtailed from the earlier half of 2018 as well as much of 2017. Key takeaway: (my own, and not something mentioned by Freddy) Reading news to get an idea of what is going on is NOT the right way to do it; instead, read news with a strict goal of formulating your own opinion of what is taking place.

Understand your risk and your needs. This is super difficult to determine, since each of us have individual goals and financial situations. It's tedious, bothersome, and often under-appreciated (somewhat like going for a regular health check-up), but it's something all of us should do on a regular basis. Unlike a health check-up, it's difficult to find resources (people as well as information) to help you formulate an assessment of your risk and needs. Too many purported financial advisories are marketing and sales people in disguise, and good-quality financial advice is often not available or practical to those of us who don't have multi-million dollar portfolios to manage. My advice: read widely, start practicing (you could set up a paper trading account if you feel that helps you understand how investment things work in general), and draw lessons. Being clear of your goals will help you be cognizant of your risk appetite, and should guide your investment decisions.

The future is, ultimately, unpredictable. This was a point that Freddy brought across - that this evening's session was not about forecasting or predictions. Instead, he guided the audience towards a way of thinking, which I feel is quite difficult to hone in an age where there is constant media attention on just about everything. Freddy did have one slide showing the federal funds rate curve, from today out to around late 2021 (if I recall correctly). While the slide was used to illustrate a different point, it did strike me that we have nary a clue if the federal funds rate in 2021 was really going to be anywhere close to projection A or B or C or D. Heck, as at 9 January 2019, we hardly know how many rate hikes there are going to be in 2019 itself - the last we heard was probably two hikes, and then now we hear that there may be scope for a pause (or not?) Even in late 2018, there was uncertainty over whether there would/wouldn't be a final hike for the year. Come 2021, will it still be Jerome Powell as Fed Chair, Donald Trump as US President? Okay, we can be sure of one thing: President Xi in China, but other than that, really everything is anyone's guess, and everyone can guess can anything.

So it's much more useful to spend one's finite mental energies developing a way of thinking, than developing fine-grained predictions. When I picture that federal funds rate curve, the only part of the curve that really matters to me is the next 12 months or so. Beginning from the second half of this subset (i.e. around 6 months out), the line widens out into a triangular-shaped area, representing a cone of possibilities. The future is likely to lie somewhere within this cone, but as we go further (two or three years from now), that cone funnels out wider and wider, covering an increasingly larger vertical span of the entire graph, such that by the end of three years, the cone is so wide that it's practically useless for any kind of point-precision projections (which is precisely the point - oh, some word play there), but it's intuitively useful to illustrate the instructive uncertainty surrounding any kind of longer time horizon projection.

And I'll leave you with these thoughts for now, cheers and out!

Right to the end

You know how they say, the game ain't over till the fat lady sings?

The previous post on 20 December 2018 could be a good example of that.

Portfolio sank into the red (!) almost right after the post, and was almost 6% down for the year, until a brief recovery in the last moments - literally between Christmas and New Year's Eve, pushed it back up into the green.

Whew!

Back where it begun

As 2018 wraps, it's time to take a look back on the year.

The chart says it all - I'm back to where I started the year. Q4 was basically a quarter of trauma, and I'm fortunate to have kept north of the S&P500, albeit slightly, in terms of my USD-denominated investments.

A couple of lessons -

Don't be greedy. Yeah, we all know that - in theory. I watched in glee as RLH climbed up far beyond my expectations, and before I knew it, it was back down at what could be considered fair/slightly discounted valuations. I am looking at a big patch of red.

Some things might not make sense - for the time being. Back on 21 May, I published a post about MU (Looking for value - case study on Micron). Guess what? That post was just about a week shy of MU's peak at $64.66. While I am lucky not to have entered at the peak, MU is now also another position that's deeply in the red. The recent weak forward guidance has not helped the cause, and makes me wonder whether the market knew beforehand that there would be weakness in NAND/DRAM demand and progressively began to price it in. As of today, the stock trades at a ridiculous TTM P/E of less than 3, but it's the future that's going to bring returns, not the past. I still like MU because of its strong cash position and the in-progress $10b buyback, but the forward guidance cannot be ignored. The company is not trimming $1.25b in capex frivolously, and must foresee market challenges ahead to be doing so. I believe there is long-term upside, but this will require patience and in the meantime I'll look for opportunities to bring down my cost basis.

Options aren't easy. I don't think I made positive returns on a single option trade this year, but this is a completely new beast for me. Options have their usefulness - buying $34 MU puts just before the earnings release would have cushioned the blow a fair bit, but I don't have enough experience to use them to my advantage yet.

With the recent volatility, it is tempting to exit one's positions and sit out the next couple of months (especially considering the Jan 2019 SSB issue will get you around 2% p.a. for the first year), but that may be an overreaction. While 2018 will fall shy of my desired returns, I take consolation in having stayed ahead of the S&P500, and will bring the lessons above into 2019.

In the meantime, I'm trying to keep a pulse on the M&A prospects, having narrowly missed on Panera Bread in 2017 and then Sodastream in 2018. Having not been able to plan a trip to the US this year (the first calendar year I've not stepped on US soil since I started university as a freshman!), my ability to get a pulse on things is severely diminished, so this is a lot more difficult than I would prefer.

On the home front, I continue to stare at lacklustre portfolio performance across all SGD-denominated holdings (seriously, I would be better off if I had put my money in SSBs) but will be focusing on finding good entry points for selected REITs in 2019. I've hitherto tried to apply my US stock thesis onto SGX stocks, to little success. In 2019, I'll shift towards a more dividend-driven approach for SGD-denominated holdings and hopefully be able to pare down on some of the big drags on my portfolio - I'm looking at you, S59.SI.

Till the next time, cheers and out.

At the one year mark with IB

I set up my account with Interactive Brokers just about one year ago. Prior to that I was using Standard Chartered as my primary online broker, followed by TDAmeritrade. So far, I have found IB most suitable for my needs.

One of the strong points of IB is the ability to generate all kinds of reports. This really helps me review what I have done, and allows me to refine or reconsider my investment and trading strategies going forward.

If you already do some form of investment (or trading), it is good to ask yourself how you are tracking your past transactions, and their respective returns. It is easy to feel good about a stock that has doubled in price after, say, 15 years, but does it occur to you that such a stock was only growing by around 4.7% per year? Assuming that dividends were negligible, was the risk sufficient to justify the incremental 0.7% p.a. yield over, say, the CPF SA account that gives around 4% per year?

Unfortunately as a Singapore resident, I cannot trade Singapore-listed stocks through IB. So I still have to rely on Standard Chartered. For tracking purposes, I found a resource called Stock Portfolio Tracker created by Kyith of Investment Moats to help track stock transactions over time. It is a very detailed spreadsheet (perhaps with more features/fields than most people might want), but it is a good starting base.

I do hope that eventually, Singapore-based online brokers will realise the big missing gap and plug it by offering similar levels of client-facing features as what IB does today. But don't hold your breath...

So how are things looking for the period August 2017 to August 2018? Pretty good. Despite lingering uncertainty in markets that began around February 2018 and continue with the varied frequency of chest-thumping by big trading nations (mainly US and China) on tariffs and all, the S&P 500 Index (blue line) is close to all-time highs, and is up roughly 15% from this time last year.

While 2017 was an extremely forgiving investment environment (you could almost make money anywhere, just a matter of how much/little), 2018 proved to be far more tumultuous, with hair-raising drops in February and April. Nonetheless, I managed to eke out around 30% returns over the one-year period (green line), beating my personal performance benchmark of 20% p.a.

There has been talk of how we are almost certainly due for a correction. No one can say when for sure, but read widely to get a pulse of the macroeconomic situation around the globe. There will definitely be an opportunity to buy in to the market at discounted valuations when (not if) the correction happens, but that could be one or two or more years from now. In the meantime, consider the opportunity costs of holding excessive cash, which often ends up as the 'default' option for most of us, but is seldom ideal in terms of efficient employment of capital.

Investment-Linked Policies (ILP)

I profess not to have much knowledge in the field of insurance, but I recently dusted off some old files and looked at one of the ILPs that was sold to me when I was barely out of secondary school.

In a nutshell:

• You should stay away from these things unless you have an exceptionally clear idea of what you are getting yourself into and why.
• If you are looking for insurance policies, you are very likely to get more cost-effective insurance through term policies (where you pay a small sum every month for coverage).
• If you are looking for investment products, you should probably look elsewhere for something that is more transparent and incurs less fees (e.g. buying index ETFs).

I am in my 13th policy year, and I recently generated a revised Benefit Illustration (BI) for my policy.

In case you are not familiar, let me briefly explain the columns:

• Basic Premiums Paid: The cumulative amount that the policyholder (me) has paid into the policy. For this policy, I am required to pay every month for 21 years. 
• Gross Death Benefit: This is the insurance component of the policy. If the policyholder were to die at age 30, the insurance payout will be somewhere between the range of $39,639 and $45,260. The guaranteed and non-guaranteed portions are pretty much what their names imply. 
• Gross Surrender Value: This is the investment component of the policy. If the policyholder were to surrender (i.e. terminate) the policy at age 30, he would receive in cash somewhere between $19,899 and $20,566. Again, guaranteed and non-guaranteed mean what they say.

You will notice that both the non-guaranteed columns increase substantially over time. This simply reflects greater uncertainty over time. I believe the non-guaranteed columns are typically built on the assumption that the company (the policy provider) is able to generate 5.25% p.a. return on its Fund. If the actual return is lower than this, then you can expect that less than the full non-guaranteed amount will accrue into the guaranteed amount for that year.

I did a quick IRR calculation for two broad scenarios:

1) Immediate surrender of the policy at end of Policy Year 13

I can expect to get around $20,000 upon immediate surrender. Based on this, my "investment" would have yielded -3.1% per year. Yes, negative yield. This is not surprising since the cumulative amount I paid is around $23,500, but I am only getting $20,000 back, after 13 years as a policyholder. Ouch.

2) Holding to maturity, i.e. Policy Year 21

For this scenario, the guaranteed surrender value is $31,239 while the non-guaranteed portion is currently $19,942, summing up to $51,181. Let's assume I get $50,000 upon maturity. The IRR in this case is around 2.5% (per year over the 21-year tenure). That feels 'okay' but nothing fantastic.

What happens if the non-guaranteed portion doesn't do so well, and I only get $40,000 upon maturity? The IRR falls to a very dismal 0.31%. That's not a very good "investment" at all, is it? 

Now, here's the twist:

For simplicity sake, let's assume I have only two options, (A) surrender the policy immediately, and (B) hold the policy to maturity. Let's ignore the fact that I can surrender the policy 1, 2, 3, 4...8 years from today.

In (A), I collect $20,000, and I am unshackled from this policy. I can use this $20,000 to invest in whatever way I wish.

In (B), I forego collecting $20,000 today, I commit to paying ~$1800 per year for 9 more years, and I stand to collect between $31,000 to $51,000 upon maturity. If I collected $50,000, my IRR for this 9-year period is around 5% p.a. Wow, this now looks very appealing! (Note though, that if I collected $40,000 instead, my IRR for this 9-year period is 1.43%.)

So the real question is, if I went for (A), do I think that I can make a return of more than 5% on the $20,000 + the $1800 per year? If I don't think I can do that (e.g. if I simply dumped it into the DBS Multiplier and assuming I could get the maximum interest rate of 3.5%, or even assuming I ploughed it all into Singapore Savings Bonds), then actually, I am better off with option (B).

This set of  rough calculations aim to illustrate a few points:

• It is usually quite painful to terminate an ILP early. The benefits tend to be back-loaded, incentivizing the policyholder to hold the policy to maturity. However, this means an extended period of exposure to the performance of the company's Fund - you have no say over what they do/don't do and you can only hope they hit the 5.25% return over the full tenure (in my case, 21 years) so that the non-guaranteed component fully materialises.
• If I ended up with the $40,000 outcome at maturity, perhaps I would comfort myself that some of the opportunity cost of my money went towards paying the insurance aspect of the policy. That would be scant comfort, since the death coverage (guaranteed component) is not even $50,000 and you can easily buy term insurance for $100,000 coverage at a much lower price.
• Hence, the policyholder is really beholden to the vagaries of the policy (from an investment POV) and is seriously overpaying (from an insurance POV).

I still haven't figured out whether I will continue with the policy, or bite the bullet and suffer the consequences of early termination. The $1800 a year could be easily invested elsewhere, but it entails a certain risk. Investing in essentially risk-free products (like Singapore Savings Bonds) is definitely out, since they only yield 2.x% at present. Even the 4.x% Astrea IV bonds does not look good compared to the potential 5% yield if I stay the course with the policy. 

The main reason why I'm faced with the above dilemma is that the ILP product itself is really quite complex, and demands detailed analysis of one's objectives and time horizon. It is perhaps an unnecessary burden that I want to wish away, but unfortunately am unable to. Now it is simply trying to make the best of the given situation.