To manage balances in its cash investment option, Westscheme has replaced an enhanced cash fund run by ING Investment Management (ING IM) with a passive offering.
The exposure to credit securities held by the ING IM Cash Plus Fund had caused the option to significantly underperform its benchmark, the UBS Bank Bills Index, Howard Rosario, chief executive of the $2.9 billion industry fund, said.
In the year ending June 30 2008, the ING IM fund returned 3.88 per cent.
The Colonial First State Premium Cash Fund, a vanilla offering which manages Westscheme’s residual cash, had replaced the ING IM product as underlying manager for the cash option, Rosario said.
At June 30, the cash option held less than $24 million. Rosario said the fund had not seen a flight to cash among its members during the recent market volatility: approximately 150 of 201,707 members had opted to move their balances into the option this year.
“A few years ago, funds were using enhanced cash as a competitive strategy. People want the return but not the volatility, and you can’t have both.”
Westscheme still uses an allocation to enhanced cash to implement its Trustees Selection.