Investors flock to cash ETFs amid rising bond yields
A cash fund was the most popular exchange traded fund in April, according to BetaShares, in its monthly review, as investors seek safety for their assets.
According to the monthly BetaShares Australian ETF Review, the BetaShares Australian High Interest Cash ETF saw inflows of $170 million during the month.
This was the first time the fund had featured in the table of top 10 inflows all year and indicated investors were seeking safe havens for their cash amid rising bond yields.
The ‘high’ part indicated investors, however, were aiming to generate higher returns than most banks offered as the fund aimed to “generate attractive income on cash deposits with income paid monthly at a rate competitive with ‘at call’ bank deposits and term deposits”.
“We saw for the first time this year, strong inflows into cash exposures, which, on a relative basis, are still able to provide investors with meaningful pick-up on cash rates versus at-call deposits,” the firm said.
“We’ve noticed that, given concerns over rising bond yields which are muting flows into fixed income, investors have been using our High Interest Cash ETF (ASX: AAA) as a core defensive capital-stable holding.
“The fund is providing a handy yield pick-up versus the benchmark cash rate, and is particularly attractive to advisers when compared to the default cash accounts on investment platforms, many of which are paying 0% rates,” the firm told Money Management.
According to FE Analytics, the BetaShares Australian High Interest Cash ETF saw returns of 0.5% over one year to 12 May, 2021, versus returns by the Australian Core Strategies universe cash enhanced-Australian dollar of 1.04%.
In a continuance of investors seeking ‘vanilla, safe’ funds, the second and third-highest inflows went into Vanguard Australian Shares Index ETF ($156 million) and iShares Core S&P ASX 200 ETF ($114 million).
Meanwhile, the ETF seeing the largest outflow was MFG Core Infrastructure Fund (Managed Fund) which lost $103 million in April. This was more than double the next-largest outflows which were $44 million seen by iShares Edge MSCI World Minimum Volatility ETF.
Magellan had also seen the highest outflows in March when it lost $88 million from its Magellan Global Fund.
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Laura Dew
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