Thank you for the reply. I guess the money market fund is not a good alternative to savings account then? I thought the money market fund generates similar yield to a saving account, trading locked interest for a fixed period to flexibility. Is that wrong?
That’s roughly correct, but the market isn’t as mature as e.g. the US, so don’t expect the same.
(and fees on mutual fund in Switzerland tend to be somewhat high, which could eat a lot of the benefit of the extra liquidity).
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I am not even thinking about fees yet. Just the performance, should I be happy about the one with YTD performance of 0.2%? It’s the best one I found in the list. Or maybe this is a very bad metrics for money market fund as the policy rates are changing? Should I look at annualized last month return? last week return? Is YTM a good metrics evaluating the money market fund?
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I think the standard is the 30-days (net) yield, but that’s standard for US funds. Some european funds show something similar.
FYI I’ve ended up using the Pictet LU short term MMF. Mostly because of if its size (billions).
I think it currently yields >1% net of fees while being liquid (can get access to money in a few days). Tho compared to fixed term deposit accounts and similar, this isn’t insured.
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In which broker did you buy it? IBKR? What were the total fees you paid (e.g. bought 10,000 CHF , paid 7 CHF fee).
Paid the flat 4.95 IBKR fee: Mutual Funds Outside the US | Interactive Brokers LLC
It did show up as a loss on the position. (E.g. bought XXk, position showed XXk, with unrealized loss of 4.95)
It’s a fund, so it is not insured but regulated and, unlike bank accounts and short/medium term notes, the fund’s assets must be segregated from the managing company’s funds. I mean, I don’t think it is more “risky” than a savings account, the “insurance” is just done differently.
Yes, I wouldn’t be worried about the fund company itself. The issue is if the fund puts the assets in a bank or other company that blows up overnight (CS style).
(It’s really not supposed to happen, at least for the reputable ones, they’d only store the money in good assets with a lot of diversification, e.g. looking at a snapshot for the pictet MMF, the top holding is 2.6% of Japan T-Bill, but then there’s going to be counterparty risk of the CHF hedging, etc.)
But then 2008 tells us things can go badly for MMFs (there’s been more regulation since then, both in US and EU side).
Yes, and that’s what prevents me from seriously thinking about investing in MMF. It supposed to be safe and low yield, but may suddenly turn out to be risky and negative yield.
Something to explore:
The lowest risk strategy is a 100% money market fund. TER 0.14% p.a.
From the first look, partially CHF hedged, which is a disadvantage from my point of view.
Thanks @Tony1337 !
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What happened to MMF in 2008? I didn’t really follow this.
One large MMF traded below its NAV and was liquidated. There was a government intervention to limit contagion and a run on MMFs.
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I also see an 0.11% TER CH1220495068 from Swisscanto. But their TER is lower than flat fee, so maybe it’s also 0.14%
Any preference for Avadis vs Swisscanto?
It’s not the fund itself, it’s the broker. How are you going to buy this Swisscanto fund? For small amounts, the transaction fees would kill all performance.
I was thinking to check if this Swisscanto fund is available on Swissquote …. Normally there are some flat fee funds there
Why a disadvantage? It’s pretty standard for those funds.
One nice thing about this fund is that it looks like the taxable income is fairly low: https://ictax.admin.ch/extern/en.html#/security/3283146/20231231 (unlike the pictet funds)
edit: though that might be an oversight, since the Avantis fund is managed by LO and all of the LO funds have a more usual 1% income reported in ictax.
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Really? Well, I have thought about the costs of hedging and higher nominal rates, which seems to be not the case, though.
They usually go for low interests bonds.
I am an Interactive Brokers client holding CHF and yielding 0 at the moment and came across the Ticker “CHFO” (Exchange Traded Product on CHF Overnight Rate listed in Switzerland). Reading into the details, the ETP costs 0.10% p.a. while CHF Overnight Saron Rate is at 1.45% p.a. - that means 1.35% p.a. yield after costs so certainly much better than earning nothing on my IB account (obviously I face costs buying the instrument and there is also 0.02% spread on the instrument). Am I missing anything else?
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