State Street’s short term investment funds are low-cost mutual funds that invest in high-quality, short-term fixed income securities. These funds aim to provide liquidity and preservation of capital while generating a modest level of income. The State Street Institutional Liquid Reserves Fund is one of the largest short term investment funds with over $90 billion in assets under management. This fund invests in government securities, bank obligations, commercial paper, and other money market instruments with a weighted average maturity of 60 days or less. Let’s take a closer look at the key features, performance and dividends of State Street’s short term investment funds.
Low expense ratios make State Street funds cost-effective
A key advantage of State Street’s short term investment funds is their low expense ratios, which range from 0.12% to 0.20%. This keeps costs low and enables the funds to maximize income for investors. The State Street Institutional Liquid Reserves Fund has an expense ratio of just 0.16%, which is very competitive compared to similar funds. The low fees help explain the fund’s popularity with institutional investors who want to maximize returns on their short-term cash positions.
State Street funds produce steady, modest yields
While short term investment funds do not offer high yields, State Street’s offerings generate relatively stable income streams. For example, the SEC 7-day yield on the Institutional Liquid Reserves Fund currently stands at 2.08%. This yield is comparable to other top-tier money market funds. The fund aims to maintain a constant $1.00 share price while providing daily liquidity, which suits investors who want low-risk cash management options.
Strong credit quality minimizes default risk
State Street short term investment funds emphasize preservation of capital, and therefore invest primarily in securities with strong credit quality. The Institutional Liquid Reserves Fund maintains an AAAm rating from Standard & Poor’s, indicating excellent safety. At least half of the fund’s assets are in A-1+ rated commercial paper, with the remainder in government and agency securities. Stringent credit standards help explain the fund’s historical stability amid challenging markets.
Daily dividends provide steady income stream
State Street short term investment funds pay dividends on a daily basis, providing investors with a consistent income stream. Rather than monthly or quarterly dividends, daily payouts align more closely with the funds’ short-term holdings. The Institutional Liquid Reserves Fund has consistently paid dividends of around 0.01% of NAV per day, equivalent to 2-3% annually. For large institutional investors, the daily dividends offer flexibility in managing short-term cash flows.
Strong past performance gives confidence
State Street’s short term investment funds have delivered consistently solid returns over time compared to peers. The Institutional Liquid Reserves Fund has outperformed its benchmark Lipper Average over 1, 5, and 10 year periods. While past performance does not guarantee future results, the fund’s long track record gives investors confidence. Conservative portfolio management has enabled State Street to minimize principal volatility while generating reasonably steady dividends.
In summary, State Street offers a lineup of low-cost short term investment funds that provide daily liquidity and income for conservative investors. Key features including competitive yields, strong credit quality, and low expense ratios make these funds a cost-effective cash management solution.