After much demand, we have relaunched the TAM Liquidity Plus portfolio - our cash alternative product returning net 5% per annum*, designed to combat rising interest rates and prevent clients from simply running to the bank. 

What is TAM Liquidity Plus?
Courtesy of inflation, almost everything is more expensive. To control this, the Bank of England (BoE) has been raising interest rates. Yes, this means higher mortgage payments and credit card bills, but the upshot of higher interest rates are higher savings rates at the bank. So, as interest rates in the UK are now 5%, savers should expect to see savings rates on their cash improving.

Given this new environment, we have relaunched our Liquidity Plus portfolio to provide clients with a cost-effective comparison to standard bank accounts, with added benefits. The underlying portfolio comprises investments in pure cash deposit funds returning net 5% per annum*, in line with the BoE interest rate. This enables clients to invest into a portfolio of very low risk funds without having to invest their money into riskier bonds or stocks.

The portfolio at a glance:
•    Very low risk: 2 out of 8 on the TAM Risk Scale
•    Short investment term horizon: 1-3years+
•    100% non-equity investments: Money Market Funds and Cash
•    Very low charges: 5bp AMC / 20bp platform fee

Download the Liquidity Plus one-pager for clients

So why not just deposit cash at the bank?
Banks are notoriously slow at offering their savers the best rates of interest possible. It can be a tactic of banks to delay passing on these high savings rates to make bigger profits. Bank savings rates are certainly improving but it will be a long time before we see savings rates that approach the official interest rate (5%). In contrast, the TAM Liquidity Plus portfolio is already returning net 5% per annum.*

Is TAM Liquidity Plus riskier than a bank account?
In short, the portfolio is designed to be as close to the risk level of cash as possible. Of course, no investment is completely risk free, but the portfolio is about as close as we can get to the risk that clients' would take from leaving their cash in a high savings account.

How do you do this?
TAM uses money market funds in the portfolio, which invest in very low risk investments, like ultra short-term government debt and cash deposit funds issued by global institutions with low risk credit ratings.

Further, as we are dealing with cash-like investments, they offer daily liquidity so cash can quickly and simply be returned to clients and without redemption penalty charges, much like they would expect from a savings account. This also ensures that when clients have more appetite for risk, they are not locked into term deposits with lower returns.

How long is this high savings rate going to last?
It’s important to note that liquidity portfolios like this should not be seen as investment portfolios which are appropriate for long-term investment returns. The stock and bond market will always be the best place to invest  for those seeking  long-term investment return. That said, the liquidity option is an effective short-term tool for clients that want their cash savings to yield a little more than what the bank can offer for a similar level of risk.

Rates on offer from our portfolio, as well as savings rates from banks, will come down when the BoE lower their interest rates, so one should not expect interest rates, and thus savings rates, to be at this level indefinitely. At that point, the traditional long-term investment route will once again point back towards stocks and bonds to deliver clients' long-term investment goals. So, by opting for TAM Liquidity Plus over a bank account, clients will benefit from a streamlined and cost-effective switch process between investment portfolios as and when they choose to increase their risk profile.

If you would like to speak with us about our Liquidity Plus portfolio, or our discretionary investment management services in general, please do not hesitate to get in touch.