Your opinions about QMMFs please

friolento

Two lots of questions, always assuming that the purchasing power of the initial capital should be preserved:

1 - Compared with global multi-asset funds, how risky do you consider QMMFs to be?

2 - If your investment horizon is not more than 5 years, would you choose a QMMF or stick with cash? Or split your money across both?

eskbanker

Global multi-asset funds cover much of the risk spectrum, whereas QMMFs will be at the bottom end.

masonic

Over the short term, I consider QMMFs to be much less risky than global multi-asset funds. Even the lowest risk category of the latter will regularly fall in value over the course of a week, whereas the former would only do so in very extreme circumstances (perhaps unprecedented). Over the long term, inflation risk becomes a significant consideration, and including some equities is the best defence against inflation. A 5 year horizon sits annoyingly between those.

I would tend to stick to cash given the choice between cash/QMMF, as cash is lower risk than QMMF and tends not to be lower return if you are active with your savings. But I am happy to hold QMMF if there is some barrier to earning interest at a competitive rate. A difference of 0.1 or 0.2% would not be enough to tempt me to move from cash into QMMF.

Liability matching with gilts of an appropriate duration is another option to consider, and you have an index linked version of those that would secure an inflation-beating return if bought and held to maturity (about RPI+0.5% for 5 year currently). I'd consider this as safe as cash (but some risk if you cannot hold to term for any reason).

alamest

I’ve used QMMFs as a parking place for money I didn’t want exposed to equity volatility, but I don’t see them as a like-for-like alternative to global multi-asset funds.

On risk, I’d put QMMFs right down at the defensive end. They’re investing in short-dated, high-quality instruments, so capital fluctuations tend to be small compared to even the lowest-risk multi-asset funds, which still hold equities and longer-dated bonds. That said, they’re not “cash under the mattress” — there is credit and liquidity risk, just usually very controlled.

For a horizon under 5 years where preserving purchasing power matters, I’d lean toward cash/QMMF rather than equities, especially if the money has a defined purpose. If it’s a flexible pot and you can tolerate some swings, splitting between cash-like and a cautious multi-asset fund could make sense.

Is this money earmarked for something specific, or more of a general medium-term reserve?

dunstonh

1 - Compared with global multi-asset funds, how risky do you consider QMMFs to be?

Global multi-asset funds can range from about 10% equities to 90% equities. So, that is pretty close to the whole risk scale.

2 - If your investment horizon is not more than 5 years, would you choose a QMMF or stick with cash? Or split your money across both?

Depends on the rates and the tax wrapper and your age.