Enhanced Cash “Yield Plus” Funds: the Treasurer's new cash management complement to money market funds

Abstract

Purpose

The purpose of this paper is to describe the emergence and current role of Enhanced Cash “Yield Plus” investment pools.

Design/methodology/approach

Provides an historical background and describes how Enhanced Cash “Yield Plus” investment pools define their investment strategies and invest their funds, now they are structured, marketed, and credit‐rated.

Findings

In just a few years, Enhanced Cash “Yield Plus” investment pools have emerged as a daily liquidity cash management complement to money market funds governed by Investment Company Act Rule 2a‐7. Yield Plus funds are a segment of the larger Enhanced Cash sector, which has been roughly defined as the market space of fund offerings between SEC Rule 2a‐7 money market funds and short‐term bond funds. Yield Plus funds (also known as “Cash Plus” funds) appear to be the most conservative funds in this sector, seeking to provide slightly higher returns for investors than money market funds, while maintaining a stable net asset value with daily liquidity. Only time will tell if “Yield Plus” funds become a true complement to, or perhaps even a replacement for, money market funds for institutional investors' short‐term cash management. In only a few short years, the success of these funds have proven that at least some market participants perceive the possible added risk is worth the potentially better return.

Originality/value

A useful introduction to an emerging class of short‐term investments.

Citation

Sobol, R.N. (2006), "Enhanced Cash “Yield Plus” Funds: the Treasurer's new cash management complement to money market funds", Journal of Investment Compliance, Vol. 7 No. 1, pp. 60-63. https://doi.org/10.1108/15285810610690242