Premier Money Market Fund is among the top five performing UK money-market funds over three and five years - but does not achieve this by taking excessive risks. This is evident in the fund's annual returns, which have been positive returns every year for the last five years. And it returned 4.5 per cent in 2008 when many other assets plunged more than 30 per cent.
Paul Smith, manager of Premier Money Market Fund, says he has generated positive returns amid historically low interest rates and after fund fees by "working his portfolio harder." This has included calling interest rates right and locking them in for a long time.
"It would be a mistake to take on more risk," says Mr Smith. "During the financial crisis some funds took excessive risk by attempting to diversify too much. I keep my portfolio clean and plain-vanilla - I try and call interest rates. That is how a money market fund should work. For the last three years we have avoided riskier assets such as long-dated floating-rate notes and mortgage-backed securities, and for a few months during 2008, commercial paper."
Short-dated floating-rate notes now account for around 35 per cent of the fund, but these are all issued by senior financial institutions. "I stick with financials to avoid corporate losses," adds Mr Smith.
The fund typically has exposure to between 20 and 30 financial institutions, although most of the assets are concentrated among the top ten issuers, which account for more than 70 per cent. But no issuer can account for more than 20 per cent of assets.
PREMIER UK MONEY MARKET Acc (PCUKMA) | |||
|---|---|---|---|
| PRICE | 126.48p | YIELD | 0.40% |
| SIZE OF FUND | £103.1m* | 1 YR PERFORMANCE | 0.47% |
| SET UP DATE | 01-Aug-89 | 3 YR PERFORMANCE | 4.58% |
| MANAGER START DATE | 10-Sep-07* | 5 YR PERFORMANCE | 13.47% |
| VOLATILITY | 0.14 | TOTAL EXPENSE RATIO | 0.6%* |
| TRACKING ERROR | 0.1 | MINIMUM INVESTMENT | £1,000 |
| BETA | 0.64 | MORE DETAILS | www.premierassetmanagement.co.uk |
Source: Investors Chronicle, *Premier Asset Management.
Performance data as at 2 August 2011.
Top ten issuer exposure as at July 2011
| Holding | Percentage |
|---|---|
| Citigroup | 12.6 |
| Rabobank Nederland | 12.2 |
| Credit Agricole | 8.8 |
| Barclays | 6.7 |
| Nordea | 5.8 |
| Overseas Chinese Banking Corp (London) | 5.8 |
| ING Bank | 5.8 |
| Northern Trust Group | 5 |
| General Electric | 4.5 |
| BNP Paribas / Fortis | 3.9 |
Security breakdown
| Sector | Percentage |
|---|---|
| Floating rates notes (financials) | 43.03 |
| Certificates of deposits | 40.26 |
| Cash deposits | 9.85 |
| Bonds (financials) | 4.47 |
| Bonds (Consumer, cyclical | 2.39 |
