Investors are deserting low interest paying, high fee bank accounts and switching to vehicles like cash management trusts, Macquarie Investment Services says.
Associate director Jason Huddy says Macquarie’s Gilt Edge Access Account has "jumped dramatically from over $50 million in April to $113 million".
New Zealand's low interest rate environment is a catalyst for growth in cash management trusts. As rates fall investors start to get a bit more particular about their money and alternatives to bank deposits start to become more attractive.
Huddy says Macquarie has been offering interest rates which, on average, were between one and two per cent higher than the average at-call rates offered by banks.
"Investors are comparing rising bank fees and low bank interest rates with the higher interest they can earn on the Gilt Edge Access Account, as well as features including at call savings, no transaction fees, cheque book access, telephone withdrawal and automatic payments," he says.
"The main groups turning to cash trusts are those with maturing term deposits, who are scanning the market for the best investment returns. As well as individuals, businesses and family trusts (which benefit from a clear audit trail on the investment, vital for efficient fund administration) are becoming greater cash trust users."
Cash trusts have also experienced dramatic growth in Australia over the past few years, largely as a result of dissatisfaction over bank changes and low bank interest rates.
Macquarie's strong growth is good news for the managed fund industry as it tries to unlock some of the more than $40 billion New Zealanders have invested in bank deposits.
AMP New Zealand general manager Rodney Cook predicts there is a big future for cash management trusts in this country, and he sees them as being an important key to unlocking some money invested in bank deposits.
He says as people discover the good rates cash management trusts pay, alongside the flexibility they will begin using these funds.
The added bonus is that cash management trusts will become an important stepping stone for people to move their money from bank deposits into growth orientated investments such as share funds.
"People find it more easy to make small investments into shares over time by using cash management trusts," he says.
Investors are deserting low interest paying, high fee bank accounts and switching to vehicles like cash management trusts, Macquarie Investment Services says.