One of the most mentioned statistics in financial markets this year is that there’s over $6 trillion in cash sitting in money market accounts. That figure steadily increased over the course of 2024.
That sizable figure is often “blamed” on individual investors. But the reality is the majority of it is attributable to institutional market participants. Of course, high interest rates over the past several years compelled professional and retail investors to boost allocations to risk-free cash. However, that party could be disrupted by falling interest rates. That would diminish the appeal of cash instruments.
For investors wanting to keep some cash on hand while garnering decent yields even as interest rates decline, there’s good news. Those goals are reachable with the NEOS Enhanced Income 1-3 Month T-Bill ETF (CSHI ). The $535 million fund, which recently turned two years old, sports a 30-day SEC yield of 4.94%. That’s competitive with some of the highest-yielding money markets available today. But those instruments are vulnerable to falling interest rates.
CSHI Could Be Credible Cash Alternative
The actively managed CSHI could be a compelling alternative to traditional cash instruments in a declining interest rate environment. That’s something for income-minded investors to ponder. The ETF generates income in two ways. One is from holdings in one- to three- month Treasury bills. The other is via selling put options on the S&P 500. CSHI’s put writing component could be appealing if stocks trend sideways or to the downside.
“The fund seeks to take advantage of tax loss harvesting opportunities in addition to utilizing SPX Index options classified as section 1256 contracts, which are subject to lower 60/40 tax rates,” according to NEOS.
CSHI offers investors who want to maintain some dry powder more flexibility than traditional cash instruments. With a CD, the accountholder must keep it until term or risk early withdrawal penalties. That’s not an issue with CSHI. With a high-yield savings account, the only avenue for income is the interest paid by the bank, which can decline when interest rates do the same. CSHI provides some buffer against falling rates via its options selling component.
Like standard cash instruments and bonds, CSHI delivers monthly income. That can be appealing to investors seeking steady income. The fund charges 0.38% per year, or $38 on a $10,000 investment.
For more news, information, and analysis, visit the Tax Efficient Income Channel.
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