Significantly increased inflows into corporate, institutional and retail cash management products are predicted by Stanlib, one of the country’s leading cash managers.
The interest-rate plateau created by last week’s monetary policy committee decision to leave rates unchanged at 9% will encourage cash-flush investors to lock in favourable yields for the next 90 days, says Ansie van Rensburg, head of cash franchise products at Stanlib.
Stanlib cash-management products typically invest in money-market instruments with an average duration of 90 days.
Van Rensburg notes: “In an environment where rates move sideways or the market expectation takes root that rates could have peaked, we traditionally see enhanced inflows because of the opportunity to go long and lock in higher yields.
“Funds have been stable to buoyant in any event, as there is currently a gap of about 150 basis points between the yield available in a cash-management fund and the return on traditional call accounts. This explains why the ‘smart money’ often prefers this option.
“Risk is well managed. Regulations insist that no more than 30% of a fund may be channelled to a single bank, ensuring appropriate diversification. And cash is available within a day when needed.”
The current state of the market provides an opportunity to entrench further the position of leading cash-management products. The minimum corporate or institutional investment is often R20-million or R25-million, but the retail entry point for some unitised versions of these vehicles can be as low as R25 000.
Van Rensburg comments: “Awareness-building among investors in the corporate and institutional market is largely a matter of preaching to the converted, but among some non-listed companies and family-owned business, the current environment creates a major marketing opportunity.
“In some cases, they still have a lingering attachment to traditional 30-day call products.
“This is also true of the retail market, though individuals are increasingly looking for ways to make their cash reserve of R25 000 or R50 000 work harder. Active cash management is the way to do it — and now is a good time to communicate the message.”