HSBC Global Asset Management is launching its first Australian Dollar Liquidity Fund in response to demand from institutional and wholesale clients who are seeking new ways to manage surplus cash as the implications of Basel III begin to take hold.

Under Basel III regulations, banks are no longer able to rely on clients’ ‘non-operational’ cash deposits for their liquidity tests, meaning investors will need to find new liquidity and capital preservation solutions to gain similar or better yields for their non-operational and other cash reserves.

“Both our regional treasury centre clients across Asia-Pacific and our Australian clients have commented on the lack of diversified cash management solutions for the Aussie dollar. The AUD fund will invest in a wider range of onshore and offshore assets than traditional Australian money market funds, giving investors a greater level of asset diversification,” says Michael Larsen, Asia-Pacific head of liquidity product, HSBC Global Asset Management.

The Australian cash market is substantial at around A$2.5 trillion (approx. US$1.96 trillion), of which A$233 billion is held in money market funds. The HSBC Australian Dollar Liquidity Fund offers same-day liquidity and has an AAA rating from both Standard and Poor’s and Moody’s. The fund invests in low-risk, high-quality money market instruments such as bank deposits, commercial paper, certificate or paper and short-term debt instruments.

“Many investors, particularly those in Asia-Pacific, see the Australian market and currency as a strong and stable investment option. This new AUD fund will provide a viable low-risk cash management solution for investors while still providing attractive money market yields,” Larsen says.

The Australian dollar fund is the eleventh liquidity fund currency offered by HSBC Global Asset Management.