DEGIRO and Money

As a Dutch broker, DEGIRO is not allowed to hold clients’
money on their behalf. Instead, all non-invested money is automatically invested,
as per standing order by the client, into money market funds.

Money Market Funds

DEGIRO believes that it is important that clients understand how the structure of these money market funds works. DEGIRO is not a bank but an investment firm. In the Netherlands, investment firms are not allowed to hold the money of clients. Therefore, when you become a client of DEGIRO, you give a standing order to invest money into a money market fund from either Morgan Stanley Investment Management or FundShare. As such, at DEGIRO you do not hold money. For every currency available in the WebTrader, a separate money market fund is also available. The objective of a money market fund is to realise a return that is equal to the market interest rate with as low risk as possible. An additional advantage to the low risk, is that your money market fund participations, just like your other investments, are kept strictly separate from the assets of DEGIRO.

Money market funds are often used by institutional investors, such as pension funds, to hold large amounts of money in a safe way. Approximately 1 trillion euros are currently being held in money market funds in Europe. (Source)

Professional structure

DEGIRO was originally founded as broker for institutional investors that demand a high degree of security. The structure of DEGIRO, including the money market funds, has been set up to comply with these requirements and has remained unchanged since its founding. Retail investors make use of the same structure wherein financial instruments, including money market fund participation, are protected in the unlikely instance of a bankruptcy of DEGIRO. This is done by placing the financial instruments of clients into separate custodian entities. As such, the assets of clients are not exposed to the company risks of DEGIRO. Therefore, in contrast to banks, a deposit guarantee scheme is rendered unnecessary to protect investors against a bankruptcy of its service provider.

"The objective of a money market fund is to realise a return that is equal to the market interest rate with as low risk as possible."

Fund providers

DEGIRO provides its clients with the option to choose between two money market fund providers. These providers are FundShare and Morgan Stanley Investment Management.

Morgan Stanley Investment Management

The Morgan Stanley Liquidity Funds will be available in the currencies EUR, USD, and GBP. The Morgan Stanley Liquidity Funds are qualified money market funds with an AAA rating and large in size, more than €20 billion. Morgan Stanley Investment Management is part of one of the largest business banks in the world.

FundShare

The FundShare Cash Funds are managed by FundShare Fund Management, a sister company of DEGIRO. FundShare manages qualified money market funds in EUR, USD and GBP. The other available money market funds in the currencies CHF, PLN, SEK, NOK, HUF, DKK, and CZK are also managed by FundShare.

Management and investment policy

The fund managers of both FundShare and Morgan Stanley ensure that the funds comply with strict requirements. Where possible the money market funds will be qualifying money market funds. Currently this is the case for the EUR, USD, and GBP funds from both FundShare and Morgan Stanley. The strictest and safest investment policy will apply to the qualifying money market funds.

The required investments in which a qualifying money market fund is allowed to invest in to comply with the strictest criteria are not always available in the applicable currency. Currently only the EUR, USD and GBP money market funds are qualified as qualifying money market funds. However, also for the other money market funds strict requirements apply. These funds are only available through FundShare.

Risk

The main objective of a money market fund is to minimise risk. With the strict investment policy, this risk is very low. According to the Key Investor Information Document (KIID) of the funds, the risk level is a 1 on a scale from 1 to 7.

For more information on the risks and the risk indicator as determined by the manager, we refer you to the prospectus, position reports and Key Investor Information Document (KIID) prepared by the manager on the website of FundShare and Morgan Stanley Investment Management. The KIIDs can also be found in our document centre.

Risicometer

Please note: losses caused by these risks will not be compensated by DEGIRO. If you invest, you run a financial risk. The value of your investments may fluctuate. Results achieved in the past do not guarantee future performance.

Qualifying money market funds

A short duration

A qualifying money market fund has a short average duration of 60 days. This means that the bonds in the portfolio are repaid on average within 60 days. This reduces the risk of no repayment.

A liquid portfolio

A qualifying money market fund invests in so-called liquid bonds, which means that they are easily tradable and can therefore be converted quickly into money.

A qualitative portfolio

The creditworthiness of issuers is continuously monitored, which limits the chance of unforeseen arrears. In case the credit rating of an entity is downgraded, the money market fund is no longer allowed to invest in the loan concerned.

A diversified portfolio

The entire fund assets of a qualifying money market fund will preferably not be invested in one single issuer. The more the fund assets are spread, the less effect a payment arrears will have on the total fund assets. The maximum exposure in a single issuing institution is 10% or 35% in the case of a state.

Costs and return of the FundShare money market fund

Investing in a money market fund is low risk but has a downside, namely in the form of a low return. For a few currencies, this return is currently negative, due to the negative market interest rates for short-term euro bonds. Among others, the EUR money market fund currently has a negative return

While any positive return on your investment into a money market funds is yours, a negative return as a result of the current interest rates and fund costs is currently compensated in full by DEGIRO on a non-committal basis. Money market funds have no entry and exit costs.

Change in compensation EUR money market funds

DEGIRO does not hold the money of clients. This is why when you become a client you give the standing order to invest your cash balance into money market funds. In order to avoid a potential misinterpretation of the new regulation, DEGIRO has deemed it best to also offer money market funds that are managed by an administrator outside of the holding of which DEGIRO is also a part. To make this possible, DEGIRO has added the money market funds of Morgan Stanley Investment Management (in the currencies EUR, USD and GBP) where you can now invest your money.

Full compensation: Morgan Stanley Euro money market fund

Using the task in the WebTrader, if you choose to invest in the Morgan Stanley Liquidity Funds, any possible negative return of the Morgan Stanley EUR Liquidity Fund will be compensated by DEGIRO.

No compensation: FundShare Euro money market fund

With the addition of the money market fund from Morgan Stanley Investment Management, DEGIRO has decided to no longer compensate the negative returns, as result of the negative interest rate and fund costs, of the FundShare money market funds.

We wish to stress that DEGIRO, as well as the holding company behind DEGIRO, in no way receives any (financial) benefits (inducement) from Morgan Stanley Investment Management for the selection of these money market funds.

Below you can find an overview (as of the end of June) of the fund returns as well as the compensations and final effective results for the client. For the most accurate returns of the funds, please see the website of the fund manager.

Return per June 2018CompensationReturn for client after changes
Morgan Stanley Money Market Funds
EUR -0.51% 0.51% 0%
USD +2.05% N/a +2.05%
GBP +0.45% N/a +0.45%
FundShare Money Market Funds
EUR -0.642% 0% -0.642%
USD +2.058% N/a +2.058%
GBP +0.462% N/a +0.462%
CHF -1.166% 1.166% 0%
PLN +0.98% N/a +0.98%
SEK -0.841% 0.841% 0%
NOK +0.06% N/a +0.06%
HUF -0.50% 0.50% 0%
DKK -1.011% 1.011% 0%
CZK +0.18% N/a +0.18%

Results achieved in the past do not guarantee future performance. For the most recent returns please see the website of the fund manager.

Please note: the compensation given by DEGIRO is on a non-committal basis. DEGIRO is not obliged to do so and can change or end the compensation on any moment. Of course we will always communicate such changes to you. The compensation only applies to negative returns as a result of negative interest and management costs. Loss suffered on an investment made by the fund will not be compensated by DEGIRO. This risk is low.

Eonia interest rate

cashfund

Questions

With money market funds, you run credit risks just as with a bank. The portfolio is after all invested in bonds (loans). However, money market funds, and in particular qualifying money market funds, adhere to very strict investment policies. Investment is only allowed to be made in bonds with a very high credit ratings and a short duration. The credit risk is therefore very limited. The deposit guarantee scheme does not apply to money market funds. However, their low risk applies for assets of both above and below 100,000 euros. That is why money market funds are often used by institutional parties to hold large amounts of money in a safe way. In total, approximately 1 trillion euros is currently held in money market funds in Europe.(Source). Moreover, your investment in money market funds is just as safely separated from DEGIRO as all your other investments at DEGIRO.

In principle, if such a credit event takes place on a loan without collateral, the whole amount that has been invested in the issuing institution can be lost. In case the fund assets are 5% exposed to such a credit event, then the value of the fund can fall by 5%. Every 100 euro in money market fund participations are then valued 95 euro. The risk for such a credit event however is very low due to the high credit ratings and short duration.
No. In the Netherlands, investment firms are not allowed to hold the money of clients. Therefore, this money market fund structure has been set up.
There are no costs associated with the buying and selling of participations in the money market funds. The management fee for the money market fund is included in the fund return. This fee can be found in the prospectus of the fund, see the website of Fundshare and Morgan Stanley Investment Management. More information about the compensation for a negative return as a result of management costs and negative market interest can be found below.

For many clients, the market interest rate of their local currency will be negative. We want to prevent our clients from being affected by this negative interest as much as possible. That is why we have decided to compensate on a non-committal basis the negative return in the money market funds as a result of the interest and management costs.

It is possible that the value of a money market fund falls as a result of losses suffered on an investment made by the fund. This can occur if, for example, the Dutch or German state can unexpectedly no longer meet its payment obligations. In such a case, DEGIRO will not offer any compensation on the losses incurred. This risk is however very low.

The compensation is entirely non-committal and does not create any rights and does not oblige DEGIRO to follow the same approach in the future. DEGIRO pays this compensation on the basis of commercial considerations. DEGIRO reserves the right to waive this compensation. DEGIRO will inform you ahead of time in the case of such changes.

The compensation will be paid to you directly once per quarter. Depending on whether your DEGIRO account is negative or positive, this compensation will be paid to you as a deposit on your trading account or as a direct money transfer to your nominated bank account, respectively. This applies to money market funds in all currencies.

For the changes in compensation that will take into effect with the addition of the Morgan Stanley Liquidity Funds, please click here.

For an overview of returns and compensation per available money market fund, please see the table above.

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