Risks · Cash
What can go wrong with NZ cash funds
Cash funds hold bank deposits and short-term money-market instruments. They are the lowest-risk fund category, but "low risk" is not the same as "no risk".
This page is information about asset-class risk dynamics, not personal financial advice. For guidance specific to your situation, consult an authorised financial adviser.
FMA standardised risk indicator across the 6 funds in our coverage
Every NZ managed fund on the FMA Disclose register publishes a standardised risk indicator on a 1 (lowest) to 7 (highest) scale, computed from recent return volatility. The table below shows how the cash funds in our coverage distribute across the scale.
- Median risk band
- 2
- Range
- 1–2
- Funds with risk band published
- 6
NZ cash funds in our coverage cluster at FMA risk indicators 1–2 — the lowest bands on the 7-point scale.
5-year return range across the class
Realised 5-year annualised returns across the 2 funds in this category for which Sorted Smart Investor reports a 5-year history. Past returns do not predict future returns; this range shows what funds in this asset class have actually delivered over the most recent 5-year window.
- Lowest realised 5y
- 2.4%
- Median realised 5y
- 2.8%
- Highest realised 5y
- 2.8%
What specifically can go wrong with cash funds
Asset-class-specific risks not captured by the single FMA risk-indicator number. These apply across the category — each individual fund\'s PDS discloses fund-specific risks on top.
- 1
Inflation risk on real returns. A cash fund returning 4–5% per annum during a period when inflation runs at 6–7% delivers a negative real (purchasing-power-adjusted) return. The nominal balance grows; what it buys shrinks.
- 2
Credit risk on bank deposits. Cash funds hold deposits with banks. NZ deposits are not government-guaranteed (the Deposit Compensation Scheme begins in mid-2025 with a NZ$100k per-institution cap). Funds holding deposits in any single bank above $100k carry residual bank-credit risk on the excess.
- 3
Manager fee can exceed earned interest in low-rate environments. When the OCR is near zero (as in 2020–2021), an annual fund charge of 0.30–0.50% can consume most of the interest the underlying deposits earn — resulting in flat or marginally-negative total returns before tax.
- 4
Unit-price funds can technically fall. Most NZ cash funds are unit-priced, not deposit-style, so the unit price can move slightly in either direction even though the underlying assets are short-term and high-grade.
Questions people ask about cash funds
Questions that recur in search results for this asset class, answered with reference to FMA Disclose register definitions and asset-class structural dynamics. Not personal financial advice.
Is a cash fund the same as a term deposit?
No. A cash fund is a unit-priced managed fund holding a portfolio of short-term instruments — its unit price can move slightly, and the income paid varies with prevailing interest rates. A term deposit is a fixed contract with a specific bank at a specific rate for a specific term. Term deposits are simpler but less liquid; cash funds are more liquid but carry the fund-manager fee and a degree of unit-price variability.
6 cash funds, ordered by FMA risk indicator
Highest-risk funds in the class first; ties broken by annual fund charge ascending. Each fund\'s page surfaces its full PDS, holdings and risk-indicator history.
| Fund | Manager | Risk band | Annual fund charge | 5y return |
|---|---|---|---|---|
| Simplicity NZ Cash Fund | Simplicity | 2 | 0.12% | — |
| Harbour Enhanced Cash Fund | Harbour | 2 | 0.26% | 2.8% |
| Lifetime Cash Fund | Lifetime | 2 | 0.65% | — |
| Kernel Cash Plus Fund | Kernel | 1 | 0.25% | — |
| Clarity Enhanced Cash PIE | Clarity | 1 | 0.26% | — |
| Summer New Zealand Cash | Summer | 1 | 0.62% | 2.4% |
Related
Source: FMA Disclose register (risk indicator + 5-year return). Methodology: /methodology.