DEGIRO and Money

During 2018, new legislation regarding money market funds will enter into force.
For transparency purposes we would like to provide you with more explanation and
information regarding these and related changes.

New legislation

Due to new legislation for money market funds stricter rules will apply to all FundShare Cash Funds. In addition, the fund manager has decided for several of the Cash Funds to qualify as ‘qualified money market funds’. This will be the case for example for the FundShare EUR Cash Funds, the FundShare USD Cash Fund, and the FundShare GBP Cash Fund. The strictest and safest investment policy will apply to these funds. This means that the duration of the loans in which these funds invest will become shorter and the credit ratings of the loans higher.

Money Market Funds

DEGIRO believes it is important that clients understand how the structure with the money market funds works. DEGIRO is not a bank but an investment firm. In the Netherlands investment firms are not allowed to hold money of clients. Therefore, when you become a client of DEGIRO, you give a standing order to invest money in money market funds (the FundShare Cash Funds). Hence, at DEGIRO you do not hold money. For every currency available in the Webtrader, a separate money market fund is available. The objective of the money market funds is to realise a return that is equal to the market interest rate with as low a risk as possible. An additional advantage to the low risk, is that your Cash Fund participations, just like your other investments, are kept strictly separate from the assets of DEGIRO.

Money market funds are often used by institutional investors, such as pension funds, to hold large amounts of money in a safe way. Approximately 1 trillion euros are currently being held in money market funds in Europe. (Source)

Professional structure

DEGIRO was originally founded as broker for institutional investors that demand a high degree of security. The structure of DEGIRO, including the money market funds, has been set up to comply with these requirements and has remained unchanged since its founding. Retail investors make use of the same structure wherein financial instruments, including money market fund participation, are strictly segregated from the assets of DEGIRO. This is done by placing the financial instruments of clients in separate custodian entities. In the case of the Cash Fund participations these are even directly held in your own name. Assets of clients are as such not exposed to the company risks of DEGIRO. Therefore, in contrast to banks no deposit guarantee scheme is necessary to protect investors against a bankruptcy of its service provider.

"The objective of the money market funds is to realise a return that is equal to the market interest rate with as low a risk as possible."

Management of the FundShare money market fund

The fund manager managing the FundShare Cash Funds, ensures that the strict requirements are complied with. For the management of the qualified money market funds, a management fee of 0.09% per year is charged. This means that yearly for every 100 euro in the money market fund, nine cents in management costs are paid out to the fund manager. These costs are included in the return of the fund and not separately charged. A negative fund return as a result of the current interest rate and management fee is currently compensated on a non-commital basis by DEGIRO, by which the compensation does not create any legal rights or obligations. See “which costs are related to the money market funds?” for more information.

Strict investment policy

During 2018, new legislation regarding money market funds will enter into force. Stricter rules will apply to all FundShare Cash Funds. Where possible the Cash Funds will qualify as qualified money market funds. This is for example the case for the EUR Cash Funds, the USD Cash Fund and the GBP Cash Fund. The strictest and safest investment policy will apply to the qualified money market funds. Within a qualified money market fund there will be exclusively invested in loans in the currency of the relevant fund, for example in euro loans for the euro money market fund. The portfolios of the loans have an average duration of less than 60 days. As a result the market and credit risks are limited in the long term.

The EUR Cash Funds are only invested in government bonds. These can be from the German, Dutch, French, Austrian and Finnish state. Only these countries are eligible due to their high credit ratings. The USD and GBP Cash Funds can invest in both government and corporate bonds. The creditworthiness of these bonds must always be AA + or AAA. These are the two highest possible ratings. In order to limit the credit risk on a counterparty in corporate loans, a maximum of 10% of the fund assets are invested in a single issuer. In the case of a government bond, a maximum of 35% is invested per state and also a maximum of 30% in a single loan.

The required bonds in which a qualified money market fund needs to invest to comply with the strictest criteria are not always available in the currency. Hence, not all Cash Funds can qualify as qualified money market funds. Still, for the other Cash Funds strict requirements apply.

You can click here to see the position report per fund.

Qualified money market funds

A short duration

A qualified money market fund has a short average duration of 60 days. This means that the loans in the portfolio are repaid on average within 60 days. This reduces the risk of no repayment. For example, it is very unlikely that the Dutch State will no longer be able to meet its obligations within 60 days.

A liquid portfolio

A qualified money market fund invests in so-called liquid loans, which means that they are easily tradable and can therefore be converted quickly into money.

A qualitative portfolio

The loans in which a qualified money market fund invests must be of high quality with a credit rating of at least AA + or AAA, such as Austrian, German, French, Finnish and Dutch government bonds. The creditworthiness of issuers is continuously monitored, which limits the chance of unforeseen arrears. In case the credit ratings deteriorate, the money market fund is not any longer allowed to invest in the loan concerned.

A diversified portfolio

The entire fund assets of a qualified money market fund will never be invested in one single issuer. The more the fund assets are spread, the less effect a payment arrears will have on the total fund assets. The maximum exposure in a single issuing institution is 10% or 35% in the case of a state.

Risk

The FundShare money market fund's main objective is to minimize risk. With the strict investment policy, the risk is very low. According to the key investor information document of the fund, a 1 on a scale of 1 to 7.

For more information on risks and the risk indicator as determined by the manager, we refer you to the information documents prepared by the manager: the prospectus and the key investor information (KIID).

Risicometer

Please note: losses caused by these risks will not be compensated by DEGIRO. If you invest, you run a financial risk. The value of your investments may fluctuate. Results achieved in the past do not guarantee the future.

 

Downloads:

Qualified money market funds Position report Key investor information document(KIID) Prospectus
EUR UCITS Link Link Link
USD Link Link Link
GBP Link Link Link
Money market fund
CHF Link Link Link
PLN Link Link Link
SEK Link Link Link
NOK Link Link Link
HUF Link Link Link
DKK Link Link Link
CZK Link Link Link
Risicometer

Please note: losses caused by these risks will not be compensated by DEGIRO. If you invest, you run a financial risk. The value of your investments may fluctuate. Results achieved in the past do not guarantee the future.

Costs and return of the FundShare money market fund

At the moment, the market interest rate for short-term euro loans with a low risk are negative. As a result, the EUR Cash Fund currently achieves a negative result.

Annually an amount of 0.09% of the fund's assets are charged as management costs for the qualified money market funds. These costs are included in the fund return.

Although any positive return on your investment is yours, a negative return as a result of the current interest and fund costs is currently compensated by DEGIRO on a non-committal basis. Click for more information. The Cash Fund has no entry and exit costs.

Below is a general overview of the situation per money market fund on the 27th of march 2018;

Qualified Money Market Fund Current Interest Compensation
EUR Negative Yes
USD Positive N/a
GBP Positive N/a
Money Market Fund
CHF Negative Yes
PLN Positive N/a
SEK Negative Yes
NOK Negative Yes
HUF Negative Yes
DKK Negative Yes
CZK Negative Yes

Please note: the compensation only applies to negative returns as a result of negative interest and management costs. Loss suffered on an investment made by the fund will not be compensated by DEGIRO. This risk is small.

Eonia interest rate

cashfund

Transparency

New European law and regulations require financial service providers to be more transparent. DEGIRO is happy to cooperate with this. That is why we have adjusted the way in which you see your participations in the Cash Fund in the WebTrader. This allows you to view the value of your participation in comparison to the previous day.

Legal information

The FundShare money market fund is a sub-fund under the Fundshare (UCITS) Umbrella Fund structure. The money market fund is registered with, and is supervised by, the Netherlands Authority for the Financial Markets (AFM). For additional information you can download the key investor information document or the prospectus here.

Eonia interest rate

cashfund

Questions

In principle, if such a credit event takes place on a loan without collateral, the whole amount that has been invested in the issuing institution can be lost. In case the fund assets are exposed for 5% to such a credit event, then the value of the fund can fall with 5%. Every 100 euro in Cash Fund participations are then valued 95 euro. The risk for such a credit event is very low.
No, in the Netherlands investment firms are not allowed to hold money of clients. Therefore, the money market fund structure has been set up.
There are no costs associated to the buying and selling of participations in the Cash Funds. The management fee for the FundShare qualified money market funds is 0.09% per year. These costs are included in the fund return. DEGIRO has decided to compensate a negative return as a result of management costs and negative market interest on a non-committal basis. You can read more in the 'How does the negative interest compensation work for the FundShare Money Market Funds?' question.

For many clients the market interest of their local currency will be negative. We want to prevent our clients from being affected by this negative interest. That is why we have decided to compensate on a non-committal basis the negative return in the Cash Funds as a result of the interest and management costs.

It is possible that the value of the Cash Fund falls as a result of losses suffered on an investment made by the fund. This can occur if, for example, the Dutch or German state can unexpectedly no longer meet its payment obligations. In such a case, DEGIRO will not offer any compensation on the losses incurred. This risk is very small.

The compensation is entirely non-committal and does not create any rights and does not oblige DEGIRO to follow the same approach in the future. DEGIRO pays this compensation on the basis of commercial considerations. DEGIRO reserves the right to waive this compensation. DEGIRO will inform you thereof in time.

Until recently, the compensation was included in the fund return. This will change for the qualified money market funds, for which you will receive the compensation directly. Soon the amount you receive can be viewed separately in the webtrader. This provides insight into the return realized by the money market fund. Your available balance in the webtrader remains unchanged.

Below you will find an overview, informing on whether there is a negative interest and compensation per available money market fund.

Qualified Money Market Fund Current Interest Compensation
EUR Negative Yes
USD Positive N/a
GBP Positive N/a
Money Market Fund
CHF Negative Yes
PLN Positive N/a
SEK Negative Yes
NOK Negative Yes
HUF Negative Yes
DKK Negative Yes
CZK Negative Yes
For the convenience of its clients, DEGIRO provides this page in multiple languages. In case of a conflict, the English version of the page (found here) will be the leading version.

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