AMP Capital is formally winding up the once-mighty Cash Advantage Fund (CAF) following an official request from the product’s depository bank, Rabobank.
The CAF closure, flagged last year after Rabobank NZ called time on selling managed funds via its online platform, RaboDirect, has been scheduled for February 23 with transactions to be completed by close of business on March 13.
Launched in 2007, CAF kicked off a ‘cash PIE’ party as a raft of other banks issued similar on-call products designed to offer a tax edge for savers on marginal rates above the ‘portfolio investment entity’ top impost of 28 per cent.
At its peak in 2009 the CAF hit over $560 million of a then-total cash PIE market of about $2.9 billion. CAF, managed by AMP Capital but reliant on Rabobank support, currently has about $60 million in the kitty.
According to data from research house, Canstar, as at November 2013 the cash PIE and term deposit PIE market totaled about $8 billion – the latter representing about 75 per cent, or $6 billion, of the entire pool – spread across 11 products and 10 providers.
However, Michael Courtney, RaboDirect key accounts manager, said the cash and term PIE market has been trending down for some time along with record-low interest rates.
“Some banks are offering as little as 0.1 per cent on deposit,” Courtney said, which has driven investors to search elsewhere for yield. The CAF current headline rate of 0.75 per cent sits mid-range in the cash PIE universe which stretches from 0.1 per cent to 2.1 per cent.
Other banks have also seen dwindling support for cash PIEs including, for example, BNZ, which experienced a drop in funds under management for its product from $172 million in March 2016 to just under $63 million 12 months later.
In a note to investors last week, AMP Capital offered CAF unit-holders the option of transferring holdings to its NZ Cash Fund if instructed by Monday March 12.
Rebekah Swan, AMP Capital head of distribution, says in the note any transfer would be free “but the NZ Cash Fund does have annual fund charges and expenses”.
Swan told Investment News NZ as the CAF is held for clients on multiple platforms AMP Capital has not been able to relay the offer directly to all unit-holders.
“It’s easy for us to communicate with those CAF clients on our own platform but we can’t see who the underlying investors are on other platforms,” she said.
Courtney said the roughly $140 million RaboDirect Term Advantage Fund (TAF), also managed by AMP Capital, would formally wind-up this October to accommodate the underlying maturities.
RaboDirect signed an agreement with Wellington-based direct fund platform InvestNow to transfer clients (excluding CAF and TAF assets) across by the end of March this year.
“Clients have until February 23 to provide consent to transfer to InvestNow and then we’ll actually transfer the funds before the end of the tax year,” Courtney said.
He said over half of RaboDirect fund clients have already elected to shift to InvestNow. RaboDirect, NZ’s first online platform targeting direct investors, has about $130 million under management.