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Cash Plus Funds: Definition, Benefits, and Real-Life Examples

Last updated 04/11/2024 by

Bamigbola Paul

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Cash plus funds are conservative investment options commonly found in Australia, tailored for investors seeking capital preservation and reasonable returns. This article delves deeper into the fundamentals, advantages, risks, and key takeaways associated with cash plus funds.
Cash plus funds represent a conservative investment option ideal for investors prioritizing capital preservation over aggressive growth. This article explores the intricacies of cash plus funds, their underlying principles, investment strategies, potential advantages, associated risks, and key considerations for investors. Whether you’re a seasoned investor or a novice exploring investment avenues, understanding the dynamics of cash plus funds is crucial for making informed financial decisions.

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Cash plus fund basics

Understanding cash plus funds

Cash plus funds are specifically crafted for risk-averse investors seeking stable returns and minimal exposure to market volatility. These funds primarily invest in a diversified portfolio comprising high-yield fixed-income securities and money market instruments. In Australia, cash plus funds are commonly benchmarked against indices like the UBS Australian Bank Bill Index.

Investment strategy

The investment strategy of cash plus funds revolves around accessing high-quality securities and bonds issued by government, government-related entities, and corporate entities in Australia. By investing in short-term debt securities and money-market instruments, cash plus funds aim to deliver higher yields compared to traditional cash funds while maintaining relatively low risk.

Performance and rating

Cash plus funds typically offer competitive performance over the long term, aligning with their objective of delivering steady returns. These funds are often rated highly for their stability and reliability, with ratings agencies like Standard & Poor’s estimating them to be comparable to A- (long-term).
Here is a list of the benefits and the drawbacks to consider.
  • Competitive long-term performance
  • Diversification benefits
  • Cost-effectiveness
  • Potential loss of capital
  • Legal and regulatory risks
  • Variance in income and capital gains

Performance comparison

Comparison with traditional cash funds

When evaluating the performance of cash plus funds, it’s essential to compare them with traditional cash funds. While both investment options prioritize capital preservation, cash plus funds typically offer higher yields due to their strategic allocation to short-term debt securities and money-market instruments. Investors seeking slightly higher returns without significant risk exposure may find cash plus funds more appealing compared to traditional cash funds.

Comparison with equity investments

In contrast to equity investments, which are inherently more volatile and speculative, cash plus funds provide a conservative alternative with steady returns. While equities offer the potential for higher returns over the long term, they also carry higher risk levels. Investors looking to balance their portfolio and reduce overall risk may consider allocating a portion of their assets to cash plus funds, complementing their equity holdings with stable income-generating investments.

Real-life examples

Case study: investor a

Investor A, a retiree seeking to preserve capital while generating supplemental income, decides to allocate a portion of their investment portfolio to cash plus funds. By investing in a well-diversified cash plus fund, Investor A enjoys steady returns and peace of mind knowing that their investments are relatively shielded from market volatility. Over time, the consistent performance of the cash plus fund complements Investor A’s retirement income strategy, ensuring financial stability during their golden years.

Case study: investor b

Investor B, a young professional with a moderate risk tolerance, incorporates cash plus funds into their investment portfolio as a conservative anchor. Despite having a higher risk tolerance, Investor B recognizes the importance of diversification and capital preservation, especially during uncertain market conditions. By strategically allocating a portion of their portfolio to cash plus funds, Investor B achieves a balanced investment approach, mitigating risk while still participating in potential market upside.


Cash plus funds offer conservative investors in Australia an attractive option for preserving capital and generating reasonable returns. With a strategic mix of high-quality securities and bonds, these funds provide diversification, stability, and cost-effectiveness. While they may not offer the same level of returns as riskier investments, cash plus funds are well-suited for investors prioritizing capital preservation and seeking steady income streams. By understanding the fundamentals, advantages, and risks associated with cash plus funds, investors can make informed decisions to build resilient and balanced investment portfolios.

Frequently asked questions

Are cash plus funds suitable for investors with a low risk tolerance?

Yes, cash plus funds are specifically designed for investors with a low risk tolerance who prioritize capital preservation over aggressive growth.

What is the typical investment duration for cash plus funds?

Cash plus funds typically have investment durations ranging from seven to eight months, although specific durations may vary based on individual fund specifications.

How do cash plus funds compare to traditional cash funds?

While both cash plus funds and traditional cash funds prioritize capital preservation, cash plus funds generally offer higher yields due to their strategic allocation to short-term debt securities and money-market instruments.

What risks should investors consider when investing in cash plus funds?

Investors should be aware of potential risks such as the loss of capital, legal and regulatory risks, and variance in income and capital gains associated with investing in cash plus funds.

Can cash plus funds be part of a diversified investment portfolio?

Yes, cash plus funds can serve as a valuable component of a diversified investment portfolio by providing stability, diversification, and cost-effectiveness, especially for conservative investors seeking balanced portfolios.

Key takeaways

  • Cash plus funds offer a mix of short-term debt securities and money-market investments for Australian investors.
  • These funds meticulously monitor and control management and operational fees, ensuring cost-effectiveness.
  • Cash plus funds provide extensive diversification in their holdings, reducing investors’ exposure to market fluctuations.

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