The five FE Crown-rated Pendal Stable Cash Plus Fund has put in an impressive performance over the past one and three-year periods, and while it may not be the most adrenaline-inducing of all the asset classes given its relative lack of risk, Pendal’s numbers show an allocation to cash can make good sense within an investor’s well-diversified, quality portfolio.
According to FE Analytics, cash funds within the ACS Cash – Australian Dollar Sector, are those which invest a minimum of 90 per cent of their assets in money market instruments, which are investments in short-term debt such as commercial paper, short-term bonds or treasury bills, that are denominated in Australian dollars.
This can include hedging back into Australian dollars.
The Pendal Stable Cash Plus Fund, which targets a return before fees and expenses that exceeds the RBA Cash Rate by at least 0.45 per cent per annum, is actively managed and aims to take advantage of investment opportunities within the Australian debt market.
According to Pendal, the fund aims to reduce volatility of returns through limited exposure to interest rate movements and prudent credit management.
The strategy charges a management fee of 0.18 per cent (as at 30 June, 2017), inclusive of total management costs, expense recoveries, indirect costs and performance fees.
The charts below show the performance of the fund versus its sector and the Reserve Bank cash rate over the past one and three years.
Following behind this strategy’s impressive performance on a three-year basis is the Macquarie Australian Diversified Income fund, which boasted a total return of 9.08 per cent.
According FE Analytics, the objective of this fund is to outperform the UBS Bank Bill Index over the medium term (before fees) and provide regular income by using an active investment strategy.
Macquarie said the fund’s management is based on accessing “different sources of value-add,” as well as applying disciplined processes that are backed by in-house research and quantitative analysis.
Notably, this strategy was also the top performer in the sector over the past five years, returning 17.09 per cent in total.
Over the past one year, this fund has delivered a total return of 2.69 per cent, outperformed by the aforementioned Pendal strategy as well as the Trilogy Enhanced Cash fund, which posted a return of 3.13 per cent.
The objective of the Trilogy strategy is to provide returns which are above the average returns of traditional cash products after fees and costs.
The fund invests in a portfolio of cash or cash-style investments, including via unlisted managed funds to deliver stability, with returns enhanced by an investment in the Trilogy Monthly Income Trust.
Such strategies illustrate that, even within a “risk-on” environment, handsome returns can still be achieved within the relative safety of cash.