How safe are the Liquidity Funds?
Preservation of capital is the prime investment objective followed by liquidity and yield. This is reflected in the Aaa/MR1+ Moody’s rating awarded to each of the liquidity sub-funds. Capital security is achieved through the funds only investing in quality money market instruments with fixed or floating interest rate maturities of less than 13 months. To minimise the market interest rate risk, the weighted average maturity (WAM) for interest reset purposes of the portfolio cannot exceed 60 days to comply with the Moody’s Aaa/MR1+ rating award. Under Moody’s criteria, the sub-funds are prohibited from investing more than 5% of their assets in a single issuer with the exception of Government Securities and overnight deposits. This should prevent major losses in the unlikely event of a default on a particular instrument.
