Euro deposit rates from Irish and international banks and institutional cash funds are currently very low and are negative in certain cases. With rates expected to remain so low for the next couple of years, it’s no wonder that more and more investors are asking themselves and their advisers this question and seeking possible alternatives.
One potential low-risk alternative is an Income and Growth Fund. While the risk profile of these types of funds is higher than the deposit accounts and cash funds mentioned above, perhaps, when some Cash funds are delivering a zero or even negative return, investors might feel it appropriate to review their investments again with their advisor.
Income & Growth Funds have been specifically designed and structured to help meet investor demand for a low risk alternative to both low-yielding bonds and low-yielding cash deposits, but which could also provide diversification away from the euro and provide protection and potential upside if the euro were to weaken significantly. The objective of these funds is to produce positive returns above cash (3-month Euribor +2.0%) on a rolling 12-month basis in a low risk and opportunistic way. They provide investors with exposure to a number of asset classes including government bonds, equities and cash and are managed within strict parameters. There is active asset allocation within each fund with an emphasis on capital preservation and focused conservative stock selection. The objective is to make money in a low risk way.
Returns of 4.2% over 1 year and 3.1% pa over 3 years have been achieved gross of fees. The fund management charge and/or product charges will vary depending on the terms and conditions of your policy.
With domestic cash deposit rates likely to continue to move lower, for suitable investors, an Income and Growth Fund represents an attractive low risk, well diversified and liquid investment alternative to those billions of euros sitting in near-zero-yielding (or in some cases, negative-yielding) deposits, maturing term deposits and cash funds.