The 2 main risks when looking at any fixed interest investments are
1) credit default
but Mutual Enhanced cash and Smarter Money active cash fund have exposure to debt of Australian banks only.
hence the risks are extremely low, unless you think Australian banks could go bust which is exceptionally unlikely,
unlike the risks associated with some other corporate bonds ( junk bonds )
2) interest rate risk, ie if interest rates rise, the price of fixed interest bonds fall as their yields rise.
however Mutual manages interest rate duration by predominantly investing in assets that reset their base interest rate frequently (usually 90 days) which mitigates the effects of rising interest rates.
Smarter Money uses Aust bank A rated FRN's ( floating rate notes ), which are about 60% of the portfolio, and these will actually rise when interest rates rise.
At this point in the interest rate cycle, ie interest rates much more likely to rise over the next few years than fall,
I am only interested in fixed interest investments that utilise FRN's as these will benefit from rising interest rates.
