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Be careful before investing in cash PIEs

Boutique wealth manager Newton Ross has raised concerns about cash Portfolio Investment Entities, or PIEs, and warned investors to make sure they've done their homework before putting their money into a cash PIE.

Tuesday, 16 June 2009

by Paul McBeth

Investors need to be aware that the products aren't simply a cash deposit, and that they share some of the characteristics of finance company debentures, said principal Mike Newton. While quality issuers such as ASB Bank, which invests its portfolios back into its own bank deposits, aren't a worry, some of the non-bank funds require closer scrutiny.

"Don't be ignorant again," said Newton. The concern is that some managers "will start adding high-earning assets to their portfolios" and investors won't be aware of the increased risks, he said.

The scrap for term deposits is making it difficult to attract funds, and Newtown is concerned some portfolio managers will introduce riskier asset classes into their PIEs to keep money flowing in.

Investors should be wary of funds with wide and varied asset classes, and people need to be aware of what assets the product holds, and also what it's open to holding, Newton said.

They also need to ensure they receive fair returns for the level of risk their investment is open to, and they need to understand the provider's financial position and ability to manage the investment.

There's nothing inherently wrong with cash PIEs, but with limited transparency, people need to be aware of what they're going into, and they shouldn't be fooled into thinking it's simple product because it has ‘cash' in the title, he said. 

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Previous News
Cash PIE Rates
Institution Rate 30% 33%
ANZ 2.60 2.67 2.79
ASB Bank 3.15 3.29 3.44
BNZ 3.70 3.44 3.60
Direct Broking Call Account 2.80 2.92 3.05
Heartland Bank 4.00 4.28 4.48
Kiwibank 2.40 2.50 2.61
Kiwibank 3.15 3.29 3.44
Nelson Building Society 3.75 3.90 4.08
RaboDirect 3.30 3.44 3.60
SBS Bank 3.25 3.11 3.28
TSB Bank 3.50 3.63 3.80
Westpac 3.15 3.24 3.39
Westpac 0.10 0.10 0.11
Westpac 4.00 4.18 4.37

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