Why use the Ifunds Cash Management Service

What advantages does iFunds Cash Management Service offer, other than increased safety and diversification?

The Investment Managers at iFunds create a portfolio of carefully researched Money Market Funds, rather than select a single Money Market Fund. iFunds believes that risk can be even further reduced by using a range of funds primarily selected from the members of the IMMFA.

A portfolio of IMMFA AAA rated Money Market Funds also offers investors a high degree of liquidity and a competitive return.

What are the advantages of a Money Market Fund compared to investing directly into money market instruments?

• Same-day or next-day liquidity with the benefit of 7-day benchmarked return.
• Greater flexibility in cash forecasting - no need to commit cash for a specific period and no penalties or "break" fees for redemptions, unlike some bank deposits.
• An investment in a portfolio of AAA rated Money Market Funds achieves a high level of diversification, therefore relieving the treasurer of the task of seeking the best deposit rates, and making numerous deposits in order not to break counterparty credit limits. Money Market Funds free up time and are more operationally efficient than placing cash on deposit.
• Most clients and treasurers’ key concerns are capital preservation, liquidity, and yield; unlike a deposit which can only offer one or two of these elements, a Money Market Fund satisfies all three requirements simultaneously.
• Offers a highly competitive return vis-á-vis a deposit, particularly in a stable or falling interest rate environment.

Another option an investor or treasurer has to manage cash is to invest directly in the Money Markets. However, there are certain issues that should be considered:

• This option is really only viable if a treasurer is able to deal in size, both to place a reasonable sized trade at a competitive price and, more importantly, to attain the necessary level of liquidity and diversification which are pre-requisites for any cash investment.
• Direct investments demand sufficient internal resources to perform the necessary credit analysis on which instruments and names to buy. For example, after the assetbacked corporate paper (ABCP) market froze up in August 2007, it has become increasingly important to differentiate between different ABCP programmes and to determine which are suitable investments.
• By investing in a Money Market Fund, a treasurer gains access to an Investment Manager’s credit resources and investment expertise. By investing directly in the money markets, a treasurer takes on the responsibility for risk management of both the credit risk aspect and the concentration of that risk. By using a Money Market Fund, a treasurer out-sources these responsibilities to the asset manager.
• Managing a cash portfolio in-house is expensive: research shows that managing $100m using the bare minimum of personnel and systems costs in excess of 20 basis points pa i.e. in excess of management fees on a Money Market Fund.