SINGAPORE: As investors flock to safety in an uncertain environment, several investment platforms have rolled out cash management accounts as an alternative to holding idle cash in banks.
These accounts – typically made up of money market funds whose yields have moved up alongside rising interest rates – tout projected returns of above 2 per cent, beating regular savings accounts and on par with some fixed deposit rates. They also offer easy withdrawals with no lock-in period.
Online trading platform Tiger Brokers is one of those that have rolled out such an option recently.
Its Tiger Vault, launched last month, allows users to choose from eight money market funds and earn up to 2.8 per cent based on current estimates. Withdrawals can be done anytime, with fund transfers back to one’s bank account taking around one business day.
Ms Grace Yong, Tiger Brokers’ business development director, said investors want safe havens away from volatile markets to park their money, but rising inflation is eroding the value of their cash savings.
Money market funds – mutual funds that invest in debt securities with short maturities and low credit risk, and have yields that tend to track central banks’ interest rates – hence could be an attractive option.
“Money market funds are traditionally regarded as a stable form of investment which offer investors a relatively low level of risk and high liquidity,” said Ms Yong.
“Like all investments, Tiger Vault carries investment risks. But as the underlying funds invest in safe assets like fixed deposits and government bonds, the risk of a negative return on any one day is low.”
Likewise, private market exchange ADDX noticed that more investors are leaving capital idle in their wallets on its platform. While some are waiting for a suitable investment opportunity, others had excess funds after redeeming earlier investments or receiving distribution payouts.
“Some investors … might even transfer the capital out to their bank accounts to deploy in an external cash management solution, before transferring it back to their ADDX wallets for their next investment,” said chief executive officer Choo Oi-Yee.
The platform introduced its own cash management tool in August. ADDX Earn, as it is called, includes two money market funds with weighted average yields to maturity of 2.22 and 2.38 per cent per annum as of end-July.
With the funds targeting low-volatility assets and having weighted average portfolio durations of less than a year, the new tool aims to “withstand short-term volatility while preserving capital”, ADDX said.
A CROWDED MARKET
To be sure, cash management accounts are not new and there are already several options offered by the likes of robo-advisers and brokerages.
Robo-adviser Syfe, for one, has a Cash+ portfolio whose projected yields have gone up in tandem with rising interest rates – from a per-annum 1.2 per cent at the start of the year to 2.3 per cent as of Sep 26.
Cash+ puts investors’ money into money market funds and debt securities with maturities of less than six months, with each maturing at different times, said head of investment advisory Ritesh Ganeriwal.
“As bonds mature, the proceeds are reinvested into new bonds at the prevailing interest rates, which are higher due to the rate hikes. As a result, the overall projected rate increases in tandem with the rate hikes, but may not track it exactly,” he added.
StashAway has made six revisions so far to the yields of its cash management solution. Simple, as the solution is called, currently offers a 2.1 per cent projected return, up from 1 per cent in May.
The robo-adviser also introduced a “slightly higher risk” version of Simple in July, citing demand from customers for medium-term options while maintaining a part of their portfolios in relatively low-risk assets.
Simple Plus – which includes money market funds, as well as short and ultra-short duration bond funds – offers higher projected returns of 3.6 to 4.1 per cent. But bond funds “can experience short-term volatility” so investors must be prepared to hold their cash for at least 12 months, the firm said.
Overall, StashAway said its cash management portfolios have attracted “increased” inflows amid the rise in expected returns.
Syfe noted that inflows into Cash+ “almost tripled” within a week when it first raised its projected returns, with total inflows “rising steadily” to date.
“With the latest hike (in September), we continue to expect similar levels of inflows compared to previous times,” said Mr Ganeriwal.
Over at Tiger Brokers, its product has since attracted about 12,000 users, with assets under management slightly under S$100 million.
“These numbers are very encouraging, and we continue to see the product picking up momentum,” Ms Yong told CNA.