ERNS as a MMF alternative

General
1

I am looking for a low volatility fund to park cash in my GIA and am trying to choose between ERNS, CSH2, and XSTR.

Looking at historical performance it seems to me like ERNS has outperformed the other two. And to me it seems like a no brainer.

Distributing better than accumulating within a taxable account.

iShares seems like lower risk / more stable / established provider than lyxor or xtrackers.

Long run performance of ERNS better despite higher fees.

No counterparty credit risk to contend with as not swap based.

Main issue to me seems that ERNS has slightly longer duration than short term money market funds (but still very short). And compared to a non-etf non swap based short term money market fund (eg royal London), it has less exposure to sovereigns and more credit risk exposure to financials.

Does my analysis seem right? Anyone hear have any takes on ERNS?

I see ERNS as a way of earning slightly more than SONIA, splitting credit risk across loads of banks, but missing out on FSCS protection…

2

Yes @bicharo, I broadly agree with your assessment of ERNS although I have no real concerns about holding CSH2 and XSTR (I hold all 3 as well as JGST in different accounts).

The weighted average duration of ERNS is about 11 months, which is relatively short but not as short as the overnight alternatives you mention. If your bias is that interest rates will fall, then sprinking in some duration makes sense.

3

ERNS does not meet all of the critetra of a Money Market fund, so your getting a higher return for taking on a little more risk. No ETF gets protection, but their funds are segregated from Invest Engine.