From July 1 2020, the name of the U Ethical Enhanced Cash Trust (ECT) will change to the U Ethical Cash Management Trust (CMT) to better reflect its objective:
“to achieve competitive risk adjusted returns while maintaining a high level of capital stability, and while limiting harm and creating positive impact through U Ethical’s ethical investment policy”.
The constitution for the CMT will be amended in line with the change to Trust name.
Currently, the ECT invests in a wide range of assets and securities, some of which are “market-linked”, meaning their prices fluctuate in different economic and market environments. The change to the investment strategy means that CMT’s investments will be limited predominantly to cash and cash equivalents (e.g. treasury bills, short-term government bonds) together with term deposits.
As a result of the change to investment strategy, the risk level of the Trust has been adjusted from a low to very low likelihood of a negative annual return.
Similarly to the ECT, the value of each unit in the CMT is designed to be maintained at $1.00 in most market environments. While the unit price is not guaranteed at $1.00, we don’t expect the price to change in normal market conditions.
The management fee for the ECT is estimated to be 1.05% per annum, while the management fee for the CMT is estimated to be up to 0.45% per annum. The lower fee reflects its simpler investment strategy and the costs of managing your investments.
For the sake of clarity, the Trust’s constitution allows us to charge a fee of up to 1.15% per annum. However, the constitution also provides U Ethical as the responsible entity with the right to accept lower fees than we are entitled to receive, defer payment or waive our entitlement to such fees.
We have chosen to exercise that right and accept lower fees in this instance.
Please also note that all returns paid to you continue to be net of fees and that the fees you pay continue to support U Ethical’s charitable purpose.
A reduction in investment risk means a lower return. Furthermore, the income returns on cash and cash equivalents are still changing from week to week. However, we estimate a distribution return for the half-year to 31 December 2020 of approximately 0.5% pa after fees.
Please note that this is an estimate only and does not reflect an actual return. Returns are not guaranteed.
The minimum initial investment amount for new accounts in the CMT will change to $1,000, i.e. there is no impact on investors with existing accounts. All other minimum amounts, including additional investments and regular savings plans, remain the same.