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When a cash fund is not actually a cash fund!

The Association of British insurers, one of the more powerful investment associations in the UK, is to launch a thorough investigation into cash funds after standard life was forced to pay compensation when its cash fund fell in value. The investigation will centre on money market instruments such as bonds and short-term deposits, many of which have gone "bad" as a consequence of the economic downturn. The association will also reflect on how these cash funds are marketed with many investors confusing the term "cash" with physical currency rather than a variety of potentially risky money market instruments.

The controversy over the Standard Life Pension Sterling Fund, which fell by nearly 5% in one day after a severe reduction in the value of its asset backed securities, has caused confusion within the marketplace with many investors looking to withdraw their investment funds. It would appear that the Standard Life fund had increased its exposure to asset backed securities, such as mortgage instruments, to approaching half of the fund without advising investors of the substantial change in investment strategy.

However, it has to be said that in more traditional investment markets these assets would probably have performed fairly well, but the current economic crisis engulfing the world stage is impacting upon a growing number of investment sectors.

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