Product Information

ETFS Enhanced USD Cash ETF (ZUSD) Factsheet

Cash Is King

Defensive assets such as cash hold an important place in portfolios not only for liquidity but also downside protection.   

When you look at the typical asset allocation ranges for the five main risk profiles it’s clear what a critical part cash plays in a portfolio; now more than ever with many deeply concerned about the end of the equity cycle.

However, many Australian investors only consider cash as AUD cash.  This is understandable, but cash balances should be diversified in the same way as equities and fixed income. This gives the benefit of both diversification and, often, better yields.

The ETFS Enhanced USD Cash ETF (ZUSD) achieves this for the low cost of 0.30% p.a.

The United States Of Play

The Federal Reserve has two main objectives. They are

1)         Low and stable inflation over the long term (a target of 2% in the U.S)

2)         Full employment

With both objectives looking stable in the current US economic environment Powell looks to be fulfilling his mandate and this has been reflected in the current Fed Target rate - set at a range of 2.25% to 2.5% - giving the market a strong indication that rates are likely to be unchanged for the remainder of the year and if on what looks like to be a small chance there is a change, it is likely to be in the form of a cut.

He is unphased by short term misses of inflation targets and concentrates on long term trends. This resonates with his recent statement (March 2019) about the use of Monetary policy, he stated that:

 “We don’t see data coming in that suggest that we should move in either direction. They suggest that we should remain patient and let the situation clarify itself over time.”

The Fed And The Reserve – Are They Kicking Goals?

The current US yields are higher than the equivalent Australian duration. As you can see in the chart above the 10-year yields on government bonds are over 50 basis points better in yield terms in the US than Australia right now.

Even with the yield curve displaying inverted characteristics, shorter duration US yields are better than the Australian equivalent.  

Current Market Deposit Rates For US And Australian Cash

The cash rates on offer on US cash deposits are significantly higher even in the scenario that the RBA raises rates and the Federal Reserve holds.

Even in the unlikely event that the RBA has consecutive increases (given inflation looks stable and economic growth looks late in the cycle) to the cash rate and the Fed held rates constant, the cash deposit rates on offer to investors could remain in favour of those with US deposits. In the graph below the spread between US and Australian deposits has been more beneficial to US deposits since March 2018.

Product Solution

Investors holding US Dollar Cash should be aware of the benefits of the ZUSD - ETFS Enhanced USD Cash ETF that achieves the following:

• Exposure to US dollar cash
• Enhanced yield
• Quarterly distributions

ZUSD makes use of higher yielding deposits out to a term of 3 months in duration to help enhance the yield for investors in the fund.

Using a combination of “at call”, 1M and 3M duration deposits ZUSD is designed to give investors an enhanced US dollar cash position rather than just holding exposure to the physical US dollar.

Investors should consider diversifying their cash positions by holding non-domestic cash in addition to Aussie dollars via ZUSD.

GET MORE INFORMATION

To sign up for future ETFS Trade ideas, email infoAU@etfsecurities.com.au

This document is communicated by ETFS Management (AUS) Limited (Australian Financial Services Licence Number 466778) (“ETFS”). This document may not be reproduced, distributed or published by any recipient for any purpose. Under no circumstances is this document to be used or considered as an offer to sell, or a solicitation of an offer to buy, any securities, investments or other financial instruments and any investments should only be made on the basis of the relevant product disclosure statement which should be considered by any potential investor including any risks identified therein.

This document does not take into account your personal needs and financial circumstances. You should seek independent financial, legal, tax and other relevant advice having regard to your particular circumstances. Although we use reasonable efforts to obtain reliable, comprehensive information, we make no representation and give no warranty that it is accurate or complete.

Investments in any product issued by ETFS are subject to investment risk, including possible delays in repayment and loss of income and principal invested. Neither ETFS, ETFS Capital Limited nor any other member of the ETFS Capital Group guarantees the performance of any products issued by ETFS or the repayment of capital or any particular rate of return therefrom.

The value or return of an investment will fluctuate and investor may lose some or all of their investment. Past performance is not an indication of future performance.

Comments (0)

Add New

Attach images by dragging & dropping or by selecting them.
The maximum file size for uploads is MB. Only files are allowed.

 

The maximum number of 3 allowed files to upload has been reached. If you want to upload more files you have to delete one of the existing uploaded files first.

The maximum number of 3 allowed files to upload has been reached. If you want to upload more files you have to delete one of the existing uploaded files first.

Posting as Anonymous

Displayed next to your comments.

Comments will undergo moderation before they get published.

Cancel Send