Cash Management Trusts

A Cash Management Trust account is an investment product rather than a straightforward bank account so it has a few different characteristics when compared to a cash management account or a savings account.

It is important that investors be aware of the differences so that they can make informed investment choices when they are deciding where to put their cash investment funds. 

Basically, a Cash Management Trust (CMT) is:

  • a managed investment where the funds of individual unit holders are pooled
  • the primary investment is in cash securities
  • the value of each unit does not change, it always remains at $1 
  • a relatively low risk investment product.

Compare this to a Cash Management Account (CMA).  A CMA is:

  • a bank account which can only be offered by a regulated banking institution
  • earns money market interest on cash balances
  • can also include access via a cheque, credit or debit card facility. 

Investors in a Cash Management Trust will have to receive a Product Disclosure Statement (PDS) when they open a trust account and it is worthwhile to read the PDS carefully. Owners of a Cash Management Account should also receive a form of terms and conditions but generally do not have to be provided with a PDS.

Wherever you decide to invest your funds, some points you may want to consider are:

  • Return of capital – while these investments have a low risk of capital loss, repayment of capital invested in a CMT is not guaranteed.
  • Withdrawals – because the CMT is a trust the manager can decide to suspend withdrawals when it considers it to be in the best interest of CMT account holders.
  • Market risk – return on investment is directly affected by changes to the official cash rate as determined by the RBA.
  • Initial deposit – some CMT and CMA accounts may request that you deposit a minimum amount upon commencement, for example Macquarie Bank’s CMT requires $5,000 initial deposit.  Ordinary savings accounts typically have no or very low minimum deposit requirements.
  • Minimum operating balance – some accounts require a minimum amount to remain in the account at all times.
  • Types of Transactions – some CMT accounts may have limitations on the types of transaction that they associate with the account.  For example, some CMT accounts do not have a cheque or debit card facility.
  • Fees – some CMT accounts may charge management and ongoing fees.
  • Interest – usually calculated daily but paid monthly.   
  • Interest rates – CMT accounts generally offer competitive rates of interest, usually better than a savings account. Most CMA accounts offer tiered rates of return depending on account balances.
  • Underlying investments – the manager of the CMT generally pools the money of individual investors and this is then invested in short dated securities such as government and semi-government securities, bills of exchange, negotiable certificates of deposit, promissory notes, call deposits and other professional money market investments.  As such, it can be a convenient vehicle for the average investor to gain access to the professional money market.
  • Instrument risk - ensure an understanding of the instruments held by a CMT manager.
  • Management - consider whether the trust's management has the appropriate skills and experience to manage the investment.

It is up to you as an individual investor to decide which type of account will best suit your needs. 

Other resources

Canstar Cannex comparison table of Cash Management Trust Interest Rates.

A useful tools section at this website where you can compare different types of accounts.