QMMFs are required by regulations to maintain a low-risk strategy by investing in financial instruments such as government bonds. They are subject to higher regulatory scrutiny and must meet higher quality standards than other money market funds.
Credit risk
If a QMMF in which your cash is invested becomes insolvent, you may lose some of your cash.
Safeguard: To manage this risk, we select only high-quality QMMFs, and we monitor them frequently.
Management risk
Performance can be affected by the decisions made by the QMMF manager. Poor investment choices or strategies could result in lower returns or increased risk.
Safeguard: To manage this risk, we select only reputable QMMF managers.
Interest rate risk
The value of the assets in a QMMF can be affected by changes in the interest rates of central banks. If interest rates rise, the value of existing underlying assets, such as bonds, might decrease.
Safeguard: We select QMMFs who invest mainly in short-term bonds and are highly liquid.
Liquidity risk
While QMMFs are usually highly liquid, extreme market conditions may impact this. Under such circumstances, a high number of withdrawal requests could potentially lead to delays.
Safeguard: We make sure that enough client money is in liquid cash to process withdrawals immediately.