Once called funds, now we prefer to call them cash funds but the meaning is always the same. They are mutual funds that can be invested in stocks trading but only in short term securities and short term bonds. The cash funds aim on high security with a very limited time not only provided with rating, but high ratings. The maximum duration of the portfolio is equal to 6 months. For this reason they are chosen by investors who shied away from investments in medium long term and prefered to park temporarily savings to obtain a small revaluation to act as a counterweight to inflation.
In Europe, the cash funds are of four types which are area euro, dollar, yen and other currencies. And that is precisely the point. By their very definition liquidity funds do not allow the coverage of exchange risk so they can go down in red when the exchange rate of the currency changes. The devaluation of the prices of securities in the portfolio is really the main risk in this type of financial products. At this random element is then added the weight of management fees which are usually hovering between 0.5% and 1%. In determining whether the selected product will be able to offer a return that beats inflation this percentage should also be calculated. So much so that unlike in the United States for two years now, the cash funds have seen a marked downward trend with a real escape from this type of investments which again are characterized by risk tending to zero but currently offer yields below the inflation rate. In other words, be good to avoid the hazard but the investment has to give some back!