I’m a new user and have set up a business account, and am wanting to transfer my personal ISA too.
I was sad to see there are no money market ETFs available to users. I see this as a huge concern for the growth of the business. For example, businesses often have significant cash on their balance sheets, and I can see InvestEngine dominating this market if they act quickly. Similarly, consumers may wish to have an element of their portfolios in cash, and a money market ETF is the safest way for them to do this.
Offering BlackRock Cash D, along with other examples, would allow Business, and ISA, customers to get as close to SONIA as possible. In an investment environment in which rates are going up, I see it as essential InvestEngine offer this products to consumers.
If you could advise:
Is this something InvestEngine would consider? E.g. If the company never plans to offer money market funds to consumers for a particular reason, could you advise, and share the reasons for this?
If Yes to above, could you advise what the average time for an ETF to be available to consumers is, please?
This is something we have been looking into. BlackRock’s Cash D is a mutual fund so it’s unlikely this will be added in the near future.
In the ETF space, there is also a lack of GBP Money Market ETFs so there is a product availability limitation from our side.
However, and this is by no means a recommendation, InvestEngine does have CSH2 (Lyxor Smart Overnight Return) which aims to achieve short term returns higher than the benchmark rate Sonia with extremely low volatility.
Just out of curiosity; but what is so great about these from an investor point of view? I am not really familiar with money market ins and outs and have never looked into it until now.
Is it similar to a normal savings account you have with a bank that you just dump money into until a rainy day or is there a lot more to it? Alternatively, is this a short term thing where you just park money overnight or for a few days and then cash out?
I assume there will be transaction and other fees involved so repetitive in and out transactions would be costly and also time consuming for transactions to clear and settle…
As such I would have thought that you deal with it like any other shares or ETF’s that you just keep on pumping money into until the day you die
…unless you have to cash out a portion of something to cover that large unexpected bill that just came through your letterbox that was not part of your monthly budget.
Based on the previous posts on this thread I have shortlisted the following 5 available on this platform that I understand are all part of the money market world:
ERNS
JGST
CSH2
QUID
XSTR
I’ll appreciate any comments or opinions you might have.
In short, just curious if I should dump a few quid into any of these and see how it goes.
The attraction is that they are relatively low risk and in theory something like CSH2 should never lose money. The main variable is how much they make. In this respect it is similar to what you could get in a high interest bank account. The current rates are quite good, around 4% in CSH2 at the moment, although this won’t always be the case.
The main benefit to me is that they are a stable place to store money on the side, ready to invest when required. You need to park it for longer than overnight due to the offer/bid price, so you’ll need to keep it at least for a few days to get back into profit. As InvestEngine make 95% of a “sell” available from the same transaction window as the sale the settlement side is not an issue for me.
Plus, you can hold them inside an ISA (or SIPP), so any spare cash (‘dry powder’) you don’t want to reinvest straight away or withdraw from the ISA can earn some income (so useful for a non-flexible S&S ISA).
Outside an ISA, to me at least, an interest bearing bank account is probably simpler, depending on interest rate available. CSH2, for example, is trying to match SONIA overnight rates, so interest rate effectively goes up and down daily, rather than waiting for abank to adjust their rates
On some platforms If you want to do a ‘Switch’ i.e. sell a fund and use the money to buy another, then you have to do this sequentially i.e. wait to get the money from the sale before you can use it to buy the new fund.
I heard somewhere that money market funds are taxed like bank interest when outside of an ISA. If I buy CSH2 is this taxed like capital gains or bank interest?
Hi! While I can’t provide specific tax advice, it’s important for you to remember that all ETFs, regardless of what they’re tracking, are considered equity products. So, they might be subject to capital gains tax, just like any other equities. This means they’re different from bank interest, and should not be treated the same way. It’s always best to consult a tax professional to understand this better
Hi,
Regarding prior comment - note that Investopedia is a US website, so the tax treatment can be different for us.
In the UK, the funds that are featured in ISAs (aka ‘reportable’), that hold predominantly bonds or track an interest rate like SONIA, are taxed as Interest Income when held outside an ISA, see HMRC leaflet HS265, section ‘How do I report my income from a reporting offshore fund?‘
There is a peculiarity if an accumulation fund though, the interest is distributed at the fund’s year-end date. If sold before that date, gains could be considered a capital gain.
Money market fund dividends for UK tax are treated as interest. If you have an accumulating one you still have to pay the tax on the interest. In this case you have to dig out and declare as interest the excess reportable income for the tax year in question,if you are subject to UK interest tax.
It’s doable but could be a faf so I’d only hold a distributing etf in a taxable account, especially as the rates are very similar.
BTW this also applies to
any accumulating etf in a taxable account.
