Building a financial legacy will include periods of navigating uncertainty and mean that you may need to assess the investment landscape before making quick decisions. The practical implication of this is that investors may have a need for an investment vehicle to hold liquid assets, such as cash, whilst waiting for an investment opportunity to present itself or to provide short-term liquidity.

The need for short-term investment vehicles

At certain periods, investors choose to hold money in short-term investment vehicles (for example in bank accounts or share-trading accounts) whilst waiting for an opportune time to invest because they may believe that the market is too volatile or expensive. In addition, such short-term investment vehicles may provide attractive yields relative to the market at certain points in time.

However, it is important to be aware of the potential drawbacks associated with holding money in what may be sub-optimal investment instruments for extended periods of time, which may include:

• exposure to single counterparty credit risk from a bank,
  relatively low and sometimes volatile yields (for example cash held in a share-trading account),
• limited access (for example in fixed-term deposits at the bank), and
• delays in getting money moved into the market when the opportunity is right.

A solution for funds waiting to be invested

To cater for the need for an offering that provides the benefits of a short-term investment vehicle and also counteracts the drawbacks noted above, we have developed a competitively priced cash account with a reduced risk profile. The key features of this offering are shown in the table below.

Reduced fees for existing unit trust cash investments

To address the need for a competitive fee for clients who have existing discretionary product unit trust investments on our platform as part of their PSG Wealth financial plan, we will also soon be offering two new reduced fee classes of the following funds, which will be exclusively available to clients of PSG Wealth advisers:

• The PSG Wealth Enhanced Interest Fund of Funds (G), with a management fee of 0.38% incl. VAT, and
• The PSG Money Market Fund (G), with a management fee of 0.173% incl. VAT.

The aim of this change is to support clients in consolidating cash-type investments across their portfolios on our platform, whilst continuing to offer competitive fees and enhanced returns. The change further supports our recently introduced family pricing offering at a time in which clients are increasingly seeking improved returns through competitive fees.

Access to your money

The enhanced cash solutions will be housed in a discretionary investment plan (the PSG Wealth Voluntary Investment Plan), which means that the money invested can easily be reallocated to investments that are more suited to your longer-term goals when you choose to do so. This discretionary plan also allows you to withdraw money when needed or to load a regular withdrawal instruction if you choose to do so.

Comparing cash solution yields

Money market funds generally publish daily ‘annual effective yields’. However, it is important to keep in mind that these published yields provide a short-term view of the funds’ returns, so it is usually more useful to consider returns over extended periods of time to determine consistent relative performance.

The graph below shows one-year rolling returns for the PSG funds offered as part of the enhanced cash solution, and demonstrates that these funds consistently deliver returns in excess of the South African Short-Term Fixed Interest index (SteFI) over a one year rolling period.