We welcome you to watch our latest program on FSiTV featuring high-profile economist and YBR Funds Management portfolio manager Christopher Joye, who is interviewed by editor Alice Uribe.
In the interview, Joye explains how holding an actively managed cash portfolio made up of term deposits and investment-grade floating rate notes may provide a better return on clients' cash, without materially increasing risk.
He explains that investors can avoid the traditional capital risks and complexity associated with fixed-rate bonds by investing in floating-rate notes, which have interest rates that get reset every month or quarter off bank bill benchmarks that track the RBA cash rate.
A 5-year fixed-rate bond is like investing in a 5-year term deposit, Joye says. But he highlights RBA research that shows that nobody can reliably predict interest rate movements beyond 12 months. So why take 5 years' worth of interest rate risk? In contrast, floating-rate notes are like 90-day term deposits and remove the big punt on interest rates that you get with long-dated fixed-rate bonds.
Advisers can even earn 0.75 CPD points towards their professional standards by viewing the article and by taking the accompanying quiz here.
Financial Standard's Know Your Product series is designed to educate advisers about innovative new products and test their knowledge with a series of questions