Freetrade Launches Cash Investments ETFs Tracking Overnight Interbank Rates

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Freetrade, the popular investment platform, has introduced a range of easy-access exchange-traded funds (ETFs) known as Cash Investments ETFs. These funds track the overnight interbank rates in the UK and the US, allowing investors to benefit from changes in the rates lenders charge each other. Unlike traditional investments, these ETFs cater to short to medium-term investors, offering relatively low-risk options.

The Cash Investments ETFs aim to outperform or track overnight interbank interest rates, providing investors with the flexibility to access their investments without penalties. Currently, Freetrade suggests investors could earn an expected rate of up to 5.33%, outperforming the top easy-access savings account on the market.

The funds track the Sterling Overnight Index Average (SONIA) in the UK and the Fed fund rate in the US, ensuring interest rate changes are passed on to investors overnight. This structure eliminates the need for a fund manager to pick investments, contributing to the perceived low risk.

Alex Campbell, Head of Communications at Freetrade, highlights that these ETFs offer greater flexibility than savings accounts, with returns linked to overnight lending rates rather than the banks’ discretion. Additionally, the Cash Investments ETFs are eligible for Individual Savings Accounts (ISA) and Self-Invested Personal Pensions (SIPP), allowing investors to protect their earnings from taxes.

Campbell emphasizes the advantages of these ETFs, stating, “Unlike savings accounts, these ETFs can be bought and sold during market opening hours, their returns track the latest benchmark rates set by central banks, and they can be held with cash already inside a tax wrapper.”

The investment options include a mix of GBP and USD ETFs, each associated with benchmark rates and fund fees. The Fed Fund rate ETF has an expected rate of 5.33%, outperforming the UK base rate and the top easy-access saver in the market. While Freetrade is recognized for its low-cost commission, it applies a fund fee of 0.15% to these ETFs.

This move by Freetrade aligns with the current trend of base rate hikes in the UK, presenting an attractive opportunity for investors seeking competitive returns in the evolving financial landscape.