While the data suggests funds in the IMA's Money Market sector may not quite have kept up with the growth of key LIBOR-based returns (see chart below) it is still a sector that has easily outperformed some of the staples of retail investing, such as the UK Equity Income sector, which hs been through a tough year. A quick review of performance data available on Trustnet.com suggests that there were just three other sectors of Unit Trusts and OEICs that made money in the 12 months to 3 March 2009: UK Gilt, Global Bond and Unauthorised.
Source: Financial Express Analytics
That is not to say that every constituent of the Money Market sector has done equally well, but it still remains the fact that it would have been hard to find a constituent that actually lost money, and even then the losses would in most cases have been pretty low relative to those seen in most other sectors.
Among the better performers is the Fidelity Moneybuilder Cash ISA. The fund, which is managed by Tim Foster, has a 3-Crown rating from Financial Express, and is a constituent of the AFI Cautious index.
Top funds in sector, ranked by 1-yr performance
|
Fund |
1y | 3y | 5y |
|---|---|---|---|
| Jessop (AAM) Cash PP Acc | 5.1 | n/a | n/a |
| SG Cash Inst | 5.0 | 16.4 | 26.7 |
| Fidelity Moneybuilder Cash ISA | 4.8 | 15.1 | 22.4 |
| Aberdeen Cash A Inc | 4.5 | 11.8 | 18.5 |
| Premier UK Money Market Acc | 4.5 | 12.8 | 20.4 |
Source: Trustnet, 2 March 2009
Erick Muller, fixed income investment director at Fidelity International, says the performance is down to a number of factors, which influence the way the fund is managed.
"Fidelity International employs a multi-strategy approach to fixed income investing," he says.
"This means the portfolio manager can draw upon the ideas generated by a large team of credit analysts, the pricing information of in house traders and the macro analysis of our quantitative team. He uses these to put together a large number of small positions in which he has a very high conviction but also seeking to ensure no one position or strategy dominates performance or risk.”
"Understanding every detail of the deposits available, their time to maturity and the issuing counterparties is crucial to the management of the Fidelity MoneyBuilder Cash ISA. While ratings agencies and broker analysis plays a role, our most important filter is in-house research. This access to analysis by both credit and equity research teams gives the portfolio manager an unparalleled view of not just the deposits on offer but the strength and stability of the institutions behind them."
Risk management for this fund focuses on capital preservation, Muller adds, which is in context of the challenging period that cash funds have been through in the past couple of years.
"For the Fidelity MoneyBuilder Cash ISA, while we use a variety of strategies and lots of small positions within the fund, investors have particularly benefitted from our ability to research and select better quality deposits at both the short and longer end of the maturity range - and this bar-bell approach has been a key feature of the fund over the last year. This gave the portfolio manager confidence in selecting long maturity deposits but steering clear of high profile blow ups while still providing daily liquidity and a yield above a benchmark based on the better deposit accounts."
Referring back to the challenges that have faced the sector in the past two years, Muller says that a gap has started to widen up between the top and bottom performers in the sector, because of the two issues of risk management and asset quality.
"There are two types of cash funds: treasury style and investment style. The first, such as the Fidelity MoneyBuilder Cash ISA, seek to mimic a deposit account and therefore aim to preserve capital. They are popular with institutions as well as individual investors and the key advantage they have over a deposit account is they spread money across a number of institutions. The other type of fund is investment style. They seek yield ahead of capital preservation and, in the current environment, some have taken on investment risk to meet such targets. It is vital that investors understand exactly which type of fund they are buying - investors should not only ask about underlying assets but they should also look at the fund's net asset value. A treasury style fund that provides an income will have a stable NAV, in the case of the Fidelity fund it is £1, but an investment style fund's NAV will rise and fall."
Top 10 holdings - Fidelity MoneyBuilder Cash ISA
|
Largest holdings |
% |
|---|---|
| DGB TD 1.3% 02/02/2009 | 4.4 |
| UBS AG CD 1.7% 05/02/2009 | 4.4 |
| DANSK BANK TD 1.2% 02/02/2009 |
2.4 |
| CLYDES CD 5.5% 04/02/2009 | 2.2 |
| LLOYDTSB CD 1.65% 09/02/2009 |
2.2 |
| BARCLAYS CD 2.5% 12/03/2009 | 2.2 |
| BARCLAYS CD 2.1% 06/04/2009 |
2.2 |
| INGBANK CD 2.75% 11/03/2009 | 2.2 |
| RBS CD 2.6% 06/04/2009 |
2.2 |
| NATIXIS SA CD 1.9% 10/02/2009 | 2.2 |
Source: Trustnet, 2 March 2009