One asset class that has been largely bypassed in the strong growth in the exchange traded fund market is cash. Of 157 ETFs listed on the Australian Securities Exchange, Betashares is the only manager offering a cash fund.
Now UBS Asset Management has stepped up to the plate, launching the UBS IQ Cash ETF with the aim of producing a return above the cash rate.
The fund was listed on the ASX last week (ASX code: MONY), with fund units traded in the same way as any other ASX security.
The fund will pay monthly income, with a target return about the Reserve Bank’s official cash rate. At last check, the UBS website showed a running yield of 1.77 per cent.
The fund will invest in bank deposits and certificates of deposit issued by Australian regulated banks, Australian subsidiaries of foreign banks and branches of foreign banks.
A minimum of 50 per cent of the fund’s net asset value will be invested with the big four Australian banks.
The management fee is 18 basis points. Investors may also incur brokerage fees and commissions. The fund has a distribution reinvestment plan.
Anne Anderson, UBS head of fixed income, says the ETF is not designed as an alternative to term deposits, which would be expected to pay a higher rate.
“To get a high TD rate investors have to commit their funds for 12 months and to get the best rate you may need to invest $50,000 or more,” Anderson says.
“Our ETF is designed for investors who want simplicity, liquidity and transparency. We list all the securities we hold on the ASX.”
“This has a different function to a term deposit. It could be the cash component of a trading account or an adviser’s client account.”