What is a cash management fund?
Also known as CMFs, cash management funds are simply an alternative to a traditional bank savings or cash management account. They are generally designed for people wanting to keep cash holdings secure and easily accessible while still earning a decent interest rate. Cash management funds offer more competitive interest rates than traditional bank accounts. If you have a self-managed super fund or hold a large balance of cash, a cash management fund can be a great way to invest your surplus cash.
How do cash management funds work?
A cash management fund (CMF) operates similar to a savings or cash management account (CMA) in that it allows customers to deposit and withdraw money as required A CMF allows you to earn interest at a higher rate than a savings account, which is usually offered as a set standard rate or as a tiered rate that increases if your balance increases. Most of the time, interest is earned daily but paid monthly.
At Remara, we offer a high-standard interest rate on all our cash management funds and the option of a fixed or variable interest rate for our fixed-term accounts. Remara’s At Call Account also pays your interest daily through an increase in your units.
What is the difference between a cash management account and a cash management fund?
A Cash Management Account (CMA) is an account offered by a Bank; these accounts benefit from the $250,000 Commonwealth Government Deposit Guarantee. The Guarantee reduces the risk of the CMA, however, the rates offered are usually tiered and subject to regular deposits or hurdles.
A Cash Management Fund is a Registered Management Investment Scheme product. It offers the same liquidity as a CMA (2 days at call); however, the product doesn’t have the benefit of the Commonwealth Government Guarantee. Remara has designed its CMF At Call units to be secured by AA or greater rated credit securities, providing investors with no limitations on the size or regularity of investments.
Who is best suited to cash management funds?
If you are someone who prefers to streamline the management of their finances and likes to keep their money easily accessible from one account, then a cash management fund could be the right solution.
Our cash management funds are structured to appeal to everyone from people looking to invest their savings to active investors to those looking for an all-in-one solution, as well as people with self-managed super funds. If you have multiple investment accounts, a cash management fund can be a centralised way to streamline your finances all under one account. This allows you to track your finances easily whilst also optimising efficiency.
Cash management funds versus other types of accounts
Apart from benefiting from the security of a deposit guarantee, an investment into a cash management fund shares many similarities to other traditional bank accounts, such as savings accounts or cheque accounts:
Savings Accounts
Both savings and cash management funds generally offer competitive interest rate options. Where they can differ, though, is that some savings accounts only allow a certain number of transactions or require regular deposits to earn bonus interest.
Cheque Accounts
Depending on their setup, some cash management funds will also have cheque writing facilities, ATM withdrawals, and the use of a debit card. Cash management funds pay higher interest rates than checking accounts, which often pay little or no interest.
What to look for when comparing cash management options
Some things to consider when comparing cash management funds:
Ability to access funds
Typically, bank accounts or cash management accounts allow you to access your money through various avenues, including Internet banking, phone banking, ATMs, EFTPOS, branch banking, chequebooks, and BPAY. When looking at different cash management accounts, it is a good idea to find out how easy it is to access your money and if you can access it anytime.
Cash management funds usually offer a 48-hour notice period before you can access your cash, so you need to plan a little more. However, the interest provided is generally more, so the time delay can be worth it.
Interest rates
One critical factor to consider is the interest rate being offered. Some institutions provide one standardised high-interest rate irrespective of your account balance. In contrast, others offer tiered rates based on your balance.
Fees
Most bank and cash management accounts have a monthly account keeping fee. Depending on the method of transaction, some providers might charge transaction fees. Checking all associated fees and charges before opening any cash management fund is a good idea.
Security
As noted previously, if offered by a Bank, traditional bank accounts and cash management accounts come with a $250,000 government guarantee. Cash management funds usually cannot provide this, so understanding security protection is essential.
Pros and cons of cash management funds
Pros
Better management of your money
Having a cash management fund for your excess cash holdings and savings can streamline your finances while earning a higher-than-average interest rate. It can also minimise spending and hep you save faster as your access needs to be planned a few days in advance.
Higher interest rates
Most CMFs offer higher interest rates than other standard bank accounts, allowing you to grow your savings faster. Our cash management fund is structured to provide all account holders with the same high interest rate, irrespective of additional deposits and unlimited withdrawals.
Easy access to your money
Accessing your money is easy with a cash management fund. Many accounts offer debit cards for making purchases or withdrawing cash via ATM or EFTPOS machines.
Low-risk investment
While not covered by the Government Guarantee, a CMF can offer security across highly rated government and corporate securities. This can provide excellent coverage for the entire balance of your account, and it has no cap attached to it like the Government Guarantee.
Cons
There may not be access to in-person customer service.
In the same way, online banking institutions don’t have in-person branches; most financial providers of cash management funds operate the same way with phone or chat support. This allows them to reduce costs and pass the savings on to their customers. If you prefer face-to-face, a cash management fund might not be the right solution, or it could take an adjustment period to get used to.
Minimum balances and fees
Cash management funds will typically require a minimum account balance and will charge fees monthly. Fees are usually netted from the return shown to investors however it is important to read the PDS to understand the fee structure.
What are the different types of cash management accounts?
Typically, most cash management funds are referred to as “At Call,” meaning that investors can request access their money on a day-to-day basis the same way they would for their high-interest savings account. Our “At Call” Account – Cash Management Fund is a low-risk investment account backed by AA investment-grade assets. Designed to make investing your savings a breeze, it offers a high 5.35% p.a. return with interest calculated daily. Note the rate offered changes daily.
A less common type of cash management account is a ‘fixed term account.’ Structured to function more like a term deposit that lets you invest funds for a specific term, a fixed-term cash management account provides investors with a higher rate of return. Unique to the market, our Term Account offers up to 8.25% p.a. with the option to lock in a fixed rate upfront or choose a variable rate over a six or 12-month period.
Am I eligible to invest in one of Remara’s cash management funds?
To apply for and open one of Remara’s cash management funds, you must meet the required identification, including being an Australian or international resident over the age of 18. Our cash management funds require a minimum investment and ongoing balance to receive monthly interest payments.
Accelerate your savings
A cash management fund is a versatile way to manage your savings that combines the benefits of an investment and savings account in one. Offering higher returns and easy access to your money, they are an efficient and intelligent way to manage your finances. Whether you are an active investor or just looking to make your money work, a cash management fund can be a great alternative to traditional savings accounts. To find out more about Remara’s cash management funds or to open an account today, contact our team of experts.
