Money market fund in USD (mutual fund): what am I missing?

Investing / Portfolios
1

I have some USD I want to park in a money market fund for the time being and I’m completely lost with all the money market funds available. I’m only looking at mutual funds, not ETFs, as commissions on ETFs even at IBKR would not make sense. I tried using the fund scanner Products, Exchanges and Contracts Search | Interactive Brokers LLC but there are still dozens of potential results.

I settled on Institutional Cash Series PLC BlackRock ICS US Dollar Ultra Short Bond Fund, Select Class USD, IE (ISIN IE00B3YKVN66), does that make sense? Are there risks I’m not seeing? It seems to be a big fund (7B AUM) and returns are stable, in line with the Fed rate. But I’m honeslty clueless as to why other funds in the same asset class seem to have slightly lower returns – which I can only understand by a combination of asset allocation (grade of the debt being held) and management fees. In the case of the mutual fund I chose at BlackRock, did I miss anything?

For instance, there’s another one very similar IE00B4KZ8V93 and I have no idea how to differentiate between them, even after reading their detailed information. The first one did better most years and until recently, the second one seems to be doing better recently. All I’m understanding is that the second one is theoretically for shorter-time horizons (<60 days) whereas the ultra-short bond is recommended for 3-12 months, as it may take slightly higher risk.

Second question: if I look at ICTax, it seems the taxable event is on 30th September. What happens if I sell on 29th September and buy again this fund or another one (because of being on ice for 60 days) on 1st October. Does this avoid any tax as the ICTax calculator seems to indicate?

Many thanks!

2

The tax authorities might not like it.

3

Look up “Steuerumgehung”, which is the act of doing something solely for the purpose of evading taxes, without any (other) financial reason. It’s not forbidden or punishable, but tax authorities may tax you on that income as if you had received it.

4

I know you said no ETFs, but take a look at BOXX.

Alternatively, look at US treasuries – straight/direct, not in a fund – around the maturity you like and pick the one with the lowest coupon to pay low taxes on the interest and instead benefit from the capital gain. They’re cheap to trade on IBKR.

E.g. I had to park some USD in May this year for about a year and bought UST 0.25% 05/31/2025 (CUSIP 912828ZT0). Its yield was around 5.2% at the time, but only 0.25% of that will be in (taxed) interest paid out, the rest is capital gain.

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5

The two funds you indicate are Institutional funds, they apparently have a minimum investment in millions USD (see eg this description on FT).
My definition of some USD to park would be definitely smaller than that :wink:
Does IBKR enable smaller purchases ?

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6

Got it, thank you, I didn’t know.

7

Seems IBKR allows smaller purchases.

8

Thank you for the suggestions.

9

According to Bloomberg the first one is retail requiring a minimal investment of 1k, the second one is institutional requiring a minimal investment of 50k.

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10

50k is still better than some of the bonds I saw which had 250k minimums.

11

Just park it in BOXX and have no tax in any way.

1 Like
12

You’re going the wrong way about it. A simple ETF (yes, I know?) would be BIL.
There’s no capital appreciation but you’ll get your taxes back. That’s what I call “parking” cash.
It still has to generate.
BOXX is purely capital gains but almost no dividends (same as a Swiss bank rates, 0.3% pa).
You still have to take in account USD/CHF FX rates and risks.

I’d have a look at Pictet - Short-Term Money Market USD
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They also funds of the same type in EUR and CHF.
That’s what I use for superfluous cash at my companies.

Don’t forget the cost of buying in and out.