Liquidity products are low risk, but not zero risk
Liquidity products are designed to be among the least risky of all investment choices — after all, their primary purpose is to preserve capital and remain highly liquid.
However, while volatility should be significantly lower than in most bond or equity funds, money market funds and other liquidity products are still subject to inherent market and investment risks.
Risks and fund ratings
Understanding risk is crucial for investors to be able to choose the most effective solution for their cash portfolios. Fund ratings are a vital first step to assessing a fund’s risk profile, while liquidity fund managers with proprietary credit research resources can provide an extra layer of credit risk management.
3. Regulation and due diligence
Help is on hand from regulators, who play an increasingly important role in defining cash investment instruments and structures. Nevertheless, due diligence is still vital if cash investors are to seek out the most effective cash investments for their own needs and circumstances