When a cash fund maybe isn't a cash fund?

If you invested in a fund that called itself a “cash fund” you'd expect it to be as good as putting your money in the bank wouldn't you?

In a surprise report the Financial Services Authority (FSA) has raised concerns investors could be misled over the risks attached to some insurance company funds which are badged as 'cash' funds.

FSA found that the value of what's in your fund could go down because the annual management charges on the fund could be greater than the return the fund is earning.

Companies have now been warned about the use of “cash” in the name of a fund because it “is potentially misleading as it implies little or no risk to capital”.

Perhaps more worryingly FSA still had concerns some firms not having clear criteria around what could be a permitted investment in a “cash” fund some 9 months after fining one of the largest companies £2.45M for getting this wrong!

As ever the message is – read all the marketing literature carefully before you part with your hard earned, err, cash.

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