What Is a Cash Plus Fund

Cash plus fund is a type of fund, commonly found in Australia, which is formulated for conservative investors seeking preservation of capital and reasonable investment returns. Cash plus funds are designed for investors with a shorter-term investment horizon.

Cash plus funds are aimed at investors who are fairly risk averse.

Cash Plus Fund Basics

The portfolio managers of cash plus funds invest in a mixture of high-yield, fixed-income securities, and money market securities. Financial professionals commonly compare the success of these funds to the UBS Australian Bank Bill Index, and the fees are generally meager.

Cash plus funds are typically aimed at offering access to high-quality securities and bonds issued by the government, government-related entities, and corporate entities in Australia for a lower cost than would typically be possible. These funds usually offer a mix of short-term debt securities and money-market investments which give the opportunity to achieve higher yields than traditional cash funds. 

Cash plus funds are estimated to be comparable to A- (long-term) by the rating agency, Standard & Poor's Financial Services LLC. Time outlook is typically around seven or eight months, but can run shorter or longer depending on the specifics of an individual cash fund.

Just like the risks associated with cash plus funds, the returns for these funds are also low.

Other Advantages of Cash Plus Funds

Even though portfolio managers of cash plus funds of often design them for shorter-term investment horizons, investors can usually expect competitive performance over the long term if they choose to leave their money in the cash plus fund for a more extended period. This on-par performance happens because the mix of investments in the fund is designed to offer low-risk, steady performance and that kind of investment strategy may work for a variety of goals.

Cash plus funds are also quite diversified in their holdings. If an investor needs greater portfolio diversification, the fund may prove to be a smart way to go about achieving that goal. The kind of diversification which is usually available in the cash plus fund will most often limit an investor's exposure to the fluctuations of individual securities or industries.

Because cash plus funds are designed to have low expenses, the management and operational fees are watched and controlled very carefully. Most cash plus funds can keep costs consistently low compared to other types of investments that offer similar investment profiles.

Risks of Cash Plus Funds

Even though cash plus funds are considered to be more conservative, less risky investments, it is still possible for an investor to lose a substantial portion, or even all, of the money, invested. There are also significant legal risks. Governments or regulators may pass laws, create policy, or implement a regulation which conflicts with either specific holdings in the fund or certain classes of investments in the fund. Such developments may result in the fund's failure to achieve its investment objectives. Also, investing in a managed fund may result in different income and capital gains outcomes when compared with investing directly in securities. Depending on the goals of the investor, this may or may not be a point of concern. 

Key Takeaways

  • Cash plus funds usually offer a mix of short-term debt securities and money-market investments for investors in Australia.
  • Cash plus funds watch and control management and operational fees very carefully.
  • Cash plus funds are also quite diversified in their holdings.
  • These funds are for conservative investors who are risk averse.