These funds aim for a return in line with 7 Day LIBID which is the standard benchmark for such products. LIBID is the rate at which banks bid on Eurocurrency deposits, it is therefore lower than LIBOR which is the offered rate. However, the preservation of capital is the priority. This is achieved by using short term money market instruments that have a duration of up to 2 yrs. However, maximum Weighted Average Maturity for the portfolio as a whole will not exceed 60 days; typically it will be a lot lower than that. Investors should be aware that the yield is not fixed and that in the current interest rate environment it is likely to be low in the medium term.
The manager, Tim Foster, is currently bearish on the outlook for money markets believing that the recent extreme illiquidity and the volatility of 2008 may be repeated. The fund is appropriately positioned for this scenario. The relative quality of the portfolio in relation to its peers is the reason that we have decided to rate Foster. We, like him, are not currently chasing yield through these products irrespective of risk.
Prior to August 2008 Foster returned marginally more than some peers but since that time he has returned less. This change in the nature of the portfolio and his subsequent maintenance of a short Average Weighted Maturity promotes confidence in the managers ability to safeguard cash. Historically, the fund has consistently returned a positive growth in NAV. Foster has the benefit of utilising Fidelity’s extensive research capabilities and he has the use of regionally based credit analysts.
There is a large degree of commonality between the institutional fund and the retail version. Please note that the Moneybuilder Cash ISA can only be held in the cash component of an ISA; Fidelity Cash and Institutional Cash are not ISAable.