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Royal London Short Term Money Market Fund Y Acc
Options
Comments
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masonic said:What GeoffTF said. Imagine you have an equity portfolio packed full of tech stocks and other growth assets, but instead of the wild ride and growth potential of that, you want to match the gentle incline of SONIA. So you approach an investment bank that is always on the look-out for ways in which to make more money and they agree to pay you a return linked to SONIA in exchange for them benefitting from the returns of the racy portfolio you are holding. All good providing that agreement holds up and both parties remain solvent. So why hold all those risky investments when all you want to do is match SONIA? Well, probably you are just trying to make the portfolio as attractive as possible to your counterparties.1
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GeoffTF said:masonic said:What GeoffTF said. Imagine you have an equity portfolio packed full of tech stocks and other growth assets, but instead of the wild ride and growth potential of that, you want to match the gentle incline of SONIA. So you approach an investment bank that is always on the look-out for ways in which to make more money and they agree to pay you a return linked to SONIA in exchange for them benefitting from the returns of the racy portfolio you are holding. All good providing that agreement holds up and both parties remain solvent. So why hold all those risky investments when all you want to do is match SONIA? Well, probably you are just trying to make the portfolio as attractive as possible to your counterparties.0
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The traditional pension providers/insurers, have their own cash like funds ( Scottish Widows, Standard Life etc)
I presume they are more like the RL model and I presume in theory at least you are 100% covered for compensation?0 -
Albermarle said:The traditional pension providers/insurers, have their own cash like funds ( Scottish Widows, Standard Life etc)
I presume they are more like the RL model and I presume in theory at least you are 100% covered for compensation?0 -
masonic said:GeoffTF said:masonic said:What GeoffTF said. Imagine you have an equity portfolio packed full of tech stocks and other growth assets, but instead of the wild ride and growth potential of that, you want to match the gentle incline of SONIA. So you approach an investment bank that is always on the look-out for ways in which to make more money and they agree to pay you a return linked to SONIA in exchange for them benefitting from the returns of the racy portfolio you are holding. All good providing that agreement holds up and both parties remain solvent. So why hold all those risky investments when all you want to do is match SONIA? Well, probably you are just trying to make the portfolio as attractive as possible to your counterparties.Perhaps I have not been clear here. My two options were the fund lending money to the banks, and the fund holding equities and entering into swap contracts with those banks. The fund cannot claim FSCS compensation if its bank deposits go kaput. As I said, it is not clear that the swap option is the more risky of the two.We have the option of depositing money in a UK bank protected by the FSCS. That is clearly less risky than using any money market fund. Short dated gilts also have less default risk, but have some interest rate risk. I used a money market fund when the base rate was high, the banks were paying miserly interest rates, and we had a heavily inverted yield curve. I am not using them now.0
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GeoffTF said:masonic said:GeoffTF said:masonic said:What GeoffTF said. Imagine you have an equity portfolio packed full of tech stocks and other growth assets, but instead of the wild ride and growth potential of that, you want to match the gentle incline of SONIA. So you approach an investment bank that is always on the look-out for ways in which to make more money and they agree to pay you a return linked to SONIA in exchange for them benefitting from the returns of the racy portfolio you are holding. All good providing that agreement holds up and both parties remain solvent. So why hold all those risky investments when all you want to do is match SONIA? Well, probably you are just trying to make the portfolio as attractive as possible to your counterparties.Perhaps I have not been clear here. My two options were the fund lending money to the banks, and the fund holding equities and entering into swap contracts with those banks. The fund cannot claim FSCS compensation if its bank deposits go kaput. As I said, it is not clear that the swap option is the more risky of the two.We have the option of depositing money in a UK bank protected by the FSCS. That is clearly less risky than using any money market fund. Short dated gilts also have less default risk, but have some interest rate risk. I used a money market fund when the base rate was high, the banks were paying miserly interest rates, and we had a heavily inverted yield curve. I am not using them now.Do any money market funds put investor capital in bank deposit accounts to earn interest? I didn't think that was a thing. It seems more risky than holding ultra-short high credit quality bonds, which I believe is what most non-synthetic funds do.Edit: I see a few CDs in the RLSTMM fund holdings, so I guess they do at least feature in the mix.0
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Albermarle said:The traditional pension providers/insurers, have their own cash like funds ( Scottish Widows, Standard Life etc)
I presume they are more like the RL model and I presume in theory at least you are 100% covered for compensation?0 -
masonic said:GeoffTF said:masonic said:GeoffTF said:masonic said:What GeoffTF said. Imagine you have an equity portfolio packed full of tech stocks and other growth assets, but instead of the wild ride and growth potential of that, you want to match the gentle incline of SONIA. So you approach an investment bank that is always on the look-out for ways in which to make more money and they agree to pay you a return linked to SONIA in exchange for them benefitting from the returns of the racy portfolio you are holding. All good providing that agreement holds up and both parties remain solvent. So why hold all those risky investments when all you want to do is match SONIA? Well, probably you are just trying to make the portfolio as attractive as possible to your counterparties.Perhaps I have not been clear here. My two options were the fund lending money to the banks, and the fund holding equities and entering into swap contracts with those banks. The fund cannot claim FSCS compensation if its bank deposits go kaput. As I said, it is not clear that the swap option is the more risky of the two.We have the option of depositing money in a UK bank protected by the FSCS. That is clearly less risky than using any money market fund. Short dated gilts also have less default risk, but have some interest rate risk. I used a money market fund when the base rate was high, the banks were paying miserly interest rates, and we had a heavily inverted yield curve. I am not using them now.Do any money market funds put investor capital in bank deposit accounts to earn interest? I didn't think that was a thing. It seems more risky than holding ultra-short high credit quality bonds, which I believe is what most non-synthetic funds do.Edit: I see a few CDs in the RLSTMM fund holdings, so I guess they do at least feature in the mix.According to the data on HL, the investments are:Non-Classified 61.49%
Bonds 35.06%
Cash and Equiv. 3.45%So, only a minority is invested in bonds. The Vanguard fund appeared more conservative than RL when I looked. None of these funds is a substitute for a cash account though.1 -
Non-Classified is always a mysterious one though. I'd originally eyed the Cash and Equiv. being very low and not looked much deeper, but it looks like deposits are not included in cash.For the Vanguard fund, it's 42% "UK Treasury bills" and 15% "UK Commercial paper", with a third "Time deposit" and the remaining 9% cash.Not something I have looked at too deeply before because I had a strong incentive to hold an ETF and was comfortable with the risk of CSH2 when I'd otherwise be investing in longer duration government bonds (and indeed have been shifting back into these, but that's still in progress).0
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masonic said:Non-Classified is always a mysterious one though. I'd originally eyed the Cash and Equiv. being very low and not looked much deeper, but it looks like deposits are not included in cash.For the Vanguard fund, it's 42% "UK Treasury bills" and 15% "UK Commercial paper", with a third "Time deposit" and the remaining 9% cash.Not something I have looked at too deeply before because I had a strong incentive to hold an ETF and was comfortable with the risk of CSH2 when I'd otherwise be investing in longer duration government bonds (and indeed have been shifting back into these, but that's still in progress).0
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