ABSA closure of
money market fund, worth R75 billion.
This Absa money market fund represents nearly a fifth of all the money in South African money market funds, so why close it?
Absa’s money market fund was performing well and achieving positive returns (around 3.9% currently), but they found that investors were using it as a bank account and expecting guarantees on its returns, which is not the case when it comes to money market funds. On the other hand, the decision to close a successful fund illustrates that even a money market fund is touchable and involves risk. Furthermore, this raises the concern that ‘safe and secure’ are not synonyms for ‘guaranteed’.
According to Sunette Mulder, senior policy advisor at ASISA (Association for Savings and Investment South Africa), money market funds, on average, outperformed unit trusts that invested in shares (net of fees). Even during 2020, at the height of the South African lockdown, a record amount of R88 billion worth of investments were made into unit trusts (BusinessInsider, 2020). Furthermore, more than one third of assets under management in South African unit trusts are held in SA interest-bearing portfolios, like money market funds.