Bestinvest says
This fund suits investors who are looking for an alternative to cash deposits for their medium-term or temporary cash investments. This fund has a maximum Weighted Average Maturity of 60 days, although this typically ranges at lower levels to ensure daily liquidity, and will only invest in individual securities with a maximum duration of 397 days. These maximum duration restrictions coupled with other constraints on the fund mean it qualifies as an Institutional Money Market Funds Association (IMMFA) member fund.
The fund’s investment objectives are achieved by a combination of portfolio implementation, credit research and liquidity and risk management. The credit analyst team is structured by sector and research includes issuer assessment, industry or product dominance and relative performance. Fundamental research includes asset quality and underlying credit, inherent liquidity and management and earnings. After this rigorous research each instrument will be assigned an internal rating and an approved-for-purchase list is designed from which the portfolio manager constructs the portfolio. Restrictions on the fund include a maximum maturity of individual securities of 397 days and a maximum weighted average maturity of the portfolio of less than 60 days although in practice the WAM is considerably lower. Typically the fund will invest in commercial paper, certificates of deposits, time deposits, asset backed commercial paper and short term corporate bonds. LIBID is the interest rate at which banks bid to borrow money from other banks. In reality this rate is set marginally below LIBOR which is the average interbank lending rate.