Cash – Australian ETFs, funds & risks
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Australian cash ETFs provide investors with exposure to a pool of money that is typically invested in term deposits at major Australian banks and, potentially, a small amount is invested in short term government bonds (often called 'enhanced cash' or 'cash plus' ETFs).
While the lines can seem a little blurry, this sector is different to our Australian Fixed Interest sector, which includes funds providing a larger portion of their portfolio's exposure to Australian Government bonds/treasuries, other bonds and credit.
Cash – Australian Sector Risks
Here are some of the general risks for Australian cash style investments (it’s not a complete list):
- No guarantees. Unlike some Australian traditional term deposits, cash ETFs do not entitle ETF investors to the $250,000 per person per ADI Australian Government deposit guarantee. You can learn more about the deposit guarantee here.
- Concentration risks. Oftentimes, small or sub-scale cash ETFs invest all of the cash inside the ETF in just one or two banks. This lack of diversification could expose investors to the risk that their money is allocated to just one bank. We prefer to see the cash invested at multiple banks with high credit ratings and regulatory oversight.
- Counterparty risks. It’s important to check the Product Disclosure Statement (PDS) and any marketing documents on the ETF issuer’s website to make sure you’re comfortable with the types of banks, the regulatory oversight of those banks (e.g. APRA in Australia, various authorities in the US) and how your cash ETF is monitored.
List of ETFs to watch
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This brilliant (and free!) report is issued by Best ETFs Australia, a division of The Rask Group Pty Ltd. It is not a recommendation.
Speak to a financial professional before relying on this information and please read our Financial Services Guide (FSG).