Cash Funds: The smarter way to invest your savings

What is a Cash Fund? 

A Cash Fund is an investment product that pools money from multiple investors and places it in short-term, low-risk assets such as: 

• cash accounts 
• bank term deposits 
• short-term fixed interest securities. 

The goal is simple: provide stability and liquidity, while delivering a return that’s typically higher than an on-call savings account. Think of it as a smarter way to hold cash, earning without sacrificing access. 

Why consider a Cash Fund? 

1. Potential for better returns 

Cash Funds, by investing in a diversified mix of short-term investment products, can achieve yields that outperform standard bank accounts. 

When the Reserve Bank of New Zealand’s Official Cash Rate (OCR) is relatively low, many traditional savings accounts and term deposits can yield below the cost of living, prompting Kiwis to look for smarter ways to grow their cash. In contrast, a well-managed Cash Fund could deliver a higher yield (after fees, before tax). Over time, that difference compounds. 

2. Easy access to your money 

Term deposits require you to commit your money for a fixed period, often 6 to 12 months, or longer. Breaking the term usually means penalties or forfeited interest. Cash Funds, on the other hand, may allow withdrawals within a few business days. This flexibility is invaluable for: 

• emergency expenses 
• investment opportunities 
• lifestyle changes. 

3. Tax efficiency 

Here’s where Cash Funds really shine. Many operate under a Portfolio Investment Entity (PIE) structure, which caps your prescribed investor rate (PIR) at 28%. This can be advantageous compared to Resident Withholding Tax (RWT) on some savings products, which can reach 39% for top earners. However, it’s important to note that some bank accounts also use a PIE structure, so the tax benefit depends on the specific product you choose. 

This difference matters. Suppose you have $50,000 earning 4% interest per year: 

• at 39% tax rate: $1,560 goes to tax 
• at 28% tax rate: $1,120 goes to tax. 

Not taking into account the impact of fees, that’s $440 saved in 1 year and thousands over a decade. 

4. Professional management 

Cash Funds are actively managed by professionals who monitor market conditions and adjust holdings to optimise returns. This can mean diversification across multiple banks and investment products. 

5.. Low barriers to entry 

Most Cash Funds allow you to start with a modest amount. Sometimes as little as $500 like the MAS Investment Funds Cash Fund. This makes them accessible whether you’re building an emergency fund or managing a large cash reserve. 

If you’re looking for a smarter way to hold cash, consider whether a Cash Fund fits your financial goals. 

Introducing the MAS Investment Funds Cash Fund 

If you’re interested in exploring a Cash Fund, the MAS Investment Funds Cash Fund is one example available in New Zealand. It offers: 

• PIE tax structure: Maximum tax rate of 28%. 
• Actively managed: Our active approach to investing aims to outperform the market and deliver higher returns for your investment. 
• Flexible access: Withdrawals are usually processed within 5 business days, so your money isn’t locked away. 
• A diversified portfolio: The Cash Fund invests in a diversified mix of cash accounts, term deposits and can also invest in short-term fixed interest assets. 
• Low fees: Just 0.25% annually. 
• Low minimum investment: Start with as little as $500 and no minimum investment timeframe.  
• Open to all: Individuals, joint investors, trusts and companies are all welcome. 

Common misconceptions about Cash Funds 

They’re risky 
The MAS Investment Funds Cash Fund is considered low risk because it invests in short-term, high-quality investments. While returns aren’t guaranteed, volatility is minimal compared to shares or property.  

Also, your money in the MAS Investment Funds Cash Fund is held by an independent custodian, Public Trust, which keeps your investment separate from the fund manager’s (Medical Funds Management Limited) own finances. This means that even if Medical Funds Management Limited experiences financial difficulties, your investment remains protected. 

They’re complicated 
In reality, Cash Funds simplify things. The fund manager handles tax, reporting and compliance. You just invest and monitor your balance. 

They’re only for wealthy investors 
Not true. Many funds cater to everyday savers with low minimum investment requirements. 

How do Cash Funds compare over time? 

Let’s look at a hypothetical scenario: 

• $20,000 in a savings account at 2.5% interest per year, taxed at 33%. 
• $20,000 in a Cash Fund at 3.5% return per year (after fees), taxed at 28%. 

After 1 year: 

• Savings account: $500 interest, $165 tax, net $335. 
• Cash Fund: $700 return, $196 tax, net $504. 

That’s a 50% improvement in after-tax returns (before fees), without locking your money away.  

Who should consider a Cash Fund? 

A Cash Fund can suit a wide range of investors who want to keep their money working without locking it away. 

• Retirees: Preserve capital while earning steady income. 
• Professionals: Build savings without sacrificing liquidity. 
• Businesses and trusts: Manage cash reserves efficiently. 
• Anyone with short-term goals: House deposit, travel fund, emergency buffer. 

Important considerations for investing your money 

There are a number of important considerations when deciding if a Cash Fund is right for you. 

• Returns are not guaranteed and can fluctuate as they don’t have a fixed interest rate for the entire term. 
• You will need to pay annual fund charges. 
• You need to apply to withdraw funds. It can take up to 5 business days for a withdrawal to be paid from a MAS Investment Funds Cash Fund account. 
• Cash Funds are low risk but not risk free, and the MAS Investment Funds Cash Fund is not covered by the Government’s Depositor Compensation Scheme.   
• Past performance does not predict future results.  
• Always read the Product Disclosure Statement and consider your personal circumstances before investing. 

Seek specialist advice 

For more details, including the latest yield figure, visit MAS Investment Funds Cash Fund. You can also speak with a MAS Adviser who can discuss a range of MAS investment options to help grow your wealth and create the financial future you want. 

This article is of a general nature only and is not intended to constitute financial or legal advice. MAS is a licensed financial advice provider. Our financial advice disclosure statement is available by visiting mas.co.nz or calling 0800 800 627. © Medical Assurance Society New Zealand Limited 2025. 

Medical Funds Management Limited is the issuer and manager of MAS Investment Funds. PDS available at mas.co.nz.