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DWS strives for better rate

DWS

RateBuster Fund

Type: Oeic

Aim: Income and growth by investing in money market instruments

Minimum investment: Lump sum 1,000

Investment split: 100% in money market instruments

Isa link: Yes

Pep transfers: No

Charges: Annual 1%

Commission: Renewal 0.25%

Tel: 0800 917 0003

The DWS ratebuster fund is an Oeic investing in money market instruments. Capital security is provided through an agreement with Deutsche Bank, but this means investors can only access their money during a two day window every six months.

Arch Financial Planning director Arthur Childs says: “This is essentially a cash fund with capital security. In exchange for restricted access, the fund holds out the possibility of a return up to 3 per cent higher than bank base rates. This is achieved by investing the interest for each six month period in an actively managed currency fund.”

According to Childs the funds main attraction is the capital security which ensures that at the end of each six month period, the net asset value will be at least what it was at the beginning of the period. He says: “It is laudable for DWS to try and assist us in our competition with banks and building societies. However, by promising too much, this fund has the potential to disappoint.”

In Childs view the fund can be used instead of a cash Isa. However, he complains: “With no initial commission and just 0.25 per cent a year fund based, it is not worth having to produce a suitability letter.”

Exploring other potential downsides Childs says: “The literature says the targeted return will always be in excess of UK interest rates which is only meaningful if the targets are achieved. Investors will too easily take notice of the headline return and ignore the word targeted. If there is no return in one six month period. there would be little likelihood of making 2-3 per cent more than a deposit account over the full year.” He also points out that redemption outside the two day window every six months may be subject to a dilution levy.

Childs would prefer cautious clients to keep a large amount of their capital on deposit and invest some in a portfolio of lower risk funds rather than use the ratebuster fund. He says: “Not only would my clients more easily understand what they were doing, but I would also earn enough to cover my time.”

BROKER RATINGS

Suitability to market: Poor
Investment strategy: Good
Charges: Average
Adviser remuneration: Poor

Overall 5/10

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