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Money market ETF (Canada), need your help
March 19, 2020
1:20 pm
picassocat
Québec
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Lately cash seems to be king and money market ETF's are popular, especially in a registered account. Now that I think that I understand the mechanics behind theses products, it's a matter of choosing the right one. Doing some research, I found 5 of them (in CAD) and there may be more out there that you may know about. Anyway, here is the list and my question to you is : which one would you choose and why?

Purpose High Interest Savings ETF (PSA)
CI First Asset High Interest Savings ETF (CSAV)
iShares Premium Money Market ETF (CMR)
Evolve High Interest Savings Account ETF (HISA)
Horizons Cash Maximizer ETF (HSAV)

Thanks in advance for you feed-back

March 19, 2020
2:27 pm
Bud
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I don't have the heart to answer this

March 19, 2020
2:51 pm
picassocat
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Bud said
I don't have the heart to answer this  

Thanks Bud

March 19, 2020
5:04 pm
Loonie
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I think I'm with heartless Bud.
These things pay next to nothing at the best of times. They are only useful as a stopgap between other investments.
I would choose the one with the lowest management fee, which should be close to zero.

March 19, 2020
7:09 pm
Norman1
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The list would be more useful if it included some kind of net yield.

Not sure if they are even worth investigating. For example, Horizons Cash Maximizer ETF (HSAV):

  • Gross yield of its cash deposits is currently 1.25%.
  • Management fee is 0.18% + sales tax.

So, yield is around 1.07% before subtracting any trading commissions.

March 19, 2020
7:10 pm
Bud
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Pic you think you understand the mechanics. Maybe not the time to be invested in structured products when markets volatile. There was dislocation in the etf market as investors rushed to sell anything to raise cash causing some disconnect between price and the underlying securities. The money market froze like 08 till the fed stepped in to backstop. I think some of the ones you listed invest in high interest savings accounts. Why not buy direct it's usually best to own as close to the underlying security as possible. Back in 08 some money market funds broke the buck meaning they werent able to maintain their principal a rare occurence in normal times. Most mmf invest in commercial paper short term borrowings of corporations n governments. My advice put your money directly where you can get deposit insurance. For example Oaken while a higher yield lender is covered by cdic up to 100k for each of its subs Home Trust n Home Bank. Sometimes funds pay unexpected exorbitant distributions when other investors in a fund run for the hills in volatile times or before the end of the year when distributions are made leaving the remaining investors holding a larger bag of taxable gains.

March 19, 2020
7:43 pm
picassocat
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Thanks Bud, but part of my portfolio is in a registered account (RRSP). Yeah, I could transfer out, cumbersome & slightly complicated. I took my TFSA & margin account to Tangerine's special offer (2.75%), in a hold position until markets calm. For my RRSP, I am looking for a MM etf so I can get some interest (not much I know) and easy to sell and buy-in into the stock market at the snap of a finger. Looking closely at the five I have listed, I have no «coup de coeur», I’m undecided and want to buy-in end of month, early April. Which one is more advantageous even if the returns are measly? 🙂

March 20, 2020
6:35 am
Norman1
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If one is willing to lock in for a month or two, one can check one's broker's fixed income inventory for instruments that will mature shortly.

Rates are not going be very high. Around ½% to 1½% for corporate bonds. Saw some bankers acceptances at BMO InvestorLine. Used to be around 1.7%. Now, around 1%. Minimum $50,000 purchase though.

March 20, 2020
1:28 pm
picassocat
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March 22, 2020
10:38 am
Doug
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picassocat said
Lately cash seems to be king and money market ETF's are popular, especially in a registered account. Now that I think that I understand the mechanics behind theses products, it's a matter of choosing the right one. Doing some research, I found 5 of them (in CAD) and there may be more out there that you may know about. Anyway, here is the list and my question to you is : which one would you choose and why?

Purpose High Interest Savings ETF (PSA)
CI First Asset High Interest Savings ETF (CSAV)
iShares Premium Money Market ETF (CMR)
Evolve High Interest Savings Account ETF (HISA)
Horizons Cash Maximizer ETF (HSAV)

Thanks in advance for you feed-back  

These are not money market ETFs, except CMR, which is a money market ETF. The others, PSA, CSAV, HISA, and HSAV, are ETFs that hold cash in CDIC and provincial deposit insured banks and credit unions in HISAs and GICs.

They are fine and great instruments for parking cash.

Money market funds, by contrast, may technically not maintain a constant net asset value and are not CDIC insured. They may well hold HISAs and GICs, but most of their holdings will be treasury bills, short-term of course, high investment grade short-term bonds, and asset-backed commercial paper.

It is usually not ideal to move into money market funds from higher risk funds in a market downturn. I wouldn't recommend it, unless you absolutely cannot sleep at night and wish to exit the market long term. Then, by all means, do so as it is causing you too much emotional and mental anguish.

Cheers,
Doug

March 22, 2020
12:05 pm
picassocat
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Thanks for pointing that out Doug! I had a look at CMR money market ETF, and their holdings are almost all banks & one credit union except the followings: ONTARIO TEACHERS FINANCE TRUST, NESTLE CAPITAL CANADA LIMITED, HONDA CANADA FINANCE INC & PACCAR FINANCIAL LTD

By the end of next week, I will make my choice but that can always change in the future.

March 22, 2020
12:56 pm
Doug
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picassocat said
Thanks for pointing that out Doug! I had a look at CMR money market ETF, and their holdings are almost all banks & one credit union except the followings: ONTARIO TEACHERS FINANCE TRUST, NESTLE CAPITAL CANADA LIMITED, HONDA CANADA FINANCE INC & PACCAR FINANCIAL LTD

By the end of next week, I will make my choice but that can always change in the future.  

No problem - some brokerage account statements may even classify the HISA ETFs as "money market" funds in terms of asset class because of the type of assets they old, but yeah, they're, for all sakes and purposes, cash and cash equivalent ETFs.

Those holdings in CMR are the usual major suspects in terms of corporate bond and ABCP issuers. Ontario Teachers Finance Trust is a financing facility of the Ontario Teachers Pension Plan, and the others are all finance subsidiaries or financing vehicles of related publicly-traded companies. Fine issuers, but just something to be aware of.

Cheers,
Doug

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