Frequently asked questions about a Liquidity Reserve Account
Q. Are you a money market mutual fund?
A. No, We are a trust investment that is not subject to the investment limitations for money market mutual funds under 2a7 of the SEC.
Q. If Liquidity Reserve Account is not a money market fund then what is it?
A. The Liquidity Reserve Account is an alternative to a money market mutual fund it is structured as a trust account that offers safety of principal, transparency, liquidity, low volatility of NAV and it offers attractive returns to money market mutual funds.
Q. Why is a trust better than a mutual fund?
A. The trust provides investment transparency; you can see what you own 24/7. You are not dependent upon old or out dated information that may not represent what the fund really owns at the time of your purchase. The Reserve Funds problem with the Lehman Brothers commercial paper in 2008 is an example of the lack of transparency that is eliminated in a Liquidity Reserve Account.
Q. Is my Liquidity Reserve account FDIC insured?
A. No. Currently no money market mutual fund is FDIC insured and bank money market accounts are insured up to $250,000. All of the investments in the Liquidity Reserve Account have their interest and principal payments guaranteed by the US Government. There is no limit to the amount of money that can be invested in a Liquidity Reserve Account and have the timely payment of both principal and interest guaranteed by the US Government.
Q. How liquid is my money?
A. We only invest is obligations of the United States Government, these obligation trade in the largest and most liquid markets in the world. Normal settlement to receive funds is 3 days or less.
Q. If I need my money could I get back lees than I have invested?
A. As was said above we are not a money market mutual fund that has a $1.00 constant Net Asset Value (NAV) so depending on market conditions you could get back, on redemption, an amount that could be different than the amount you invested. We feel that paying an attractive return is better than no return as many money market fund investors have experienced over the last two and one half years.
Q. Why is your return so much higher than a money market mutual fund?
A. In order to achieve our target return our investing process also employs an asset allocation process allocating your money between T-Bills and Agency securities all of which are US Government guaranteed to the payment pf principal and interest. We have minimum percentage of assets in both laddered 90-Day T-Bill and US Agency securities. The agency securities are purchased on a non-recourse leveraged basis. This non-recourse agency leverage increases the return to investors without the normal risk associated with leveraged investment.
Q. What is target return asset allocation?
A. Target return investing uses a widely known benchmark index plus a premium to measure our performance. The combination of Target return investing and active asset allocation gives us the ability to produce the highest possible return with the lowest amount of Net Asset Value fluctuation. Our current Target return is 115% of the rate on 90-Day LIBOR.
Q. How do you achieve low NAV volatility?
A. Currently about 95% of all assets have interest rate reset time from between 30 and 60 days. As interest rates move up the rate of interest on 95% of the investments will adjust to market interest rates.
Q. Who can invest in a Liquidity Reserve Account?
A, Currently a Liquidity Reserve Account can only be purchased by institutional investors. We are working on a structure that could make the Liquidity Reserve account available to individual investors.
Q. How much must I deposit to open a Liquidity Reserve Account?
A. You can start an individual trust for $10 million.
Q. Is there a limit as to the amount that can be deposited in a Liquidity Reserve Account?
A. Currently the supply of US Government debt obligations is sufficient to meet market need.
Q. What are the fees and charges to set up a Liquidity Reserve Account?
A. Each Liquidity Reserve Account has its own trust and there are one time set up charges for the Trust. Each trust will have annual administrative and audit fee. The amount of the fees is subject to requirement of the investor in the trust. Generally speaking the fees as a percentage of assets are very small.
Q. What is the expense ratio of the Liquidity Reserve Account?
A. Our approach in pricing management fees and operating expenses it to create a flat fee of 95 basis points and to lock the fee for a significant period of time. For single accounts with deposits in excess of $100 million fees can be negotiated.
Q, Should I have more questions how do I reach you?
A. Click here and you will be directed to our Contact Us section
