The Deposit & Treasury sector only allows funds to invest in "relatively simple instruments" restricted to: current account cash, time deposits including call accounts, certificates of deposit, UK treasury bills, UK short gilts, and insured funds tracking a recognised cash index. All investments must be denominated in sterling, with a duration of no more than 12 months.
Source: Financial Express Analytics
The rules are meant to ensure the funds have "capital stability" as their core objective. But, just how well have these funds done over the past three years, particularly against those funds now left in the previous sole Money Market sector?
Trustnet figures for pension funds suggest that for 27 funds with a minimum three year record, the best – AXA Cash returned 13.8 per cent in the three years to 4 November, and the worst, Reliance Mutual Deposit, 4.5 per cent.
However, none returned more than cash as measured by sterling 3-mth LIBOR, which returned 14.34 per cent. Many did at least beat consumer price inflation of 8.04 per cent.
Over that same period, the best and worst performing ABI Money Market sector pension funds had a wider spread of performances. Zurich Building Society Related AP returned 21.2 per cent. Skandia Threadneedle UK Mon Secs shed -23.8 per.
That wider spread may be a reflection of the ability for Money Market sector funds to hold a more diverse range of assets, which bring more volatility to the portfolios.
For life funds as classified on Trustnet the performances are less good. The RSA Life Cash leads the life fund Deposit & Treasury list with a 10.7 per cent gain over three years.
A near score of funds in the life Money Market sector that did better than this, led by Original Holloway Friendly which returned 16.1 per cent.
Unfortunately for investors it appears that the activity of deciding between funds in these different pension and life sectors – Money Market and Deposity & Treasury - is a bit like splitting hairs against the much greater returns that have been made elsewhere.
Out of more than 7,000 pension funds the L&G First State Greater China Growth returned 76.5 per cent to lead the way over the past three years, with the Axa Gartmore China Opportunities, up 73.1 per cent, and Zurich Gartmore China Opportunities, up 72.1 per cent, in second and third spot respectively, according to Trustnet figures.
These funds' performances are all the more interesting given that equities indices such as the FTSE 100 overall would have underperformed both the old and "new" money market sectors in the period, but picking out the right equities exposure would have done much more for the overall performance of an investor’s own portfolio.