CMT - Cash Management Trusts

Published: 16th October 2009
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The cash management trust or cmt is an investment vehicle that was traditionally very popular. But its popularity has waned due to modern technology.

Cmt or cash management trust is a form of investment in the short-term money market, including promissory notes from blue-chip corporations and securities that are backed by the government. The cmt is able to offer attractive, low-risk returns in the short-term while offering ready access to funds.

Merchant banks, banks and other financial institutions such as building societies and broking firms often offer a cmt in response the soaring interest rates and the way in which banks have traditionally controlled it. A cmt must have a trust deed to operate, a trust manager - usually a company - to operate the investments, and a trustee to oversee all activities.

It is often possible to buy into a cmt with an investment of just a few thousand dollars, as investors' money is pooled for investment into the cmt. While there are no entry or exit fees, there are other costs to consider, such as payment of the administrators and the usual cost of buying and selling shares.

The cmt was once considered a good investment with reasonable interest rates. But since the rise of the online savings account where interest rates are usually even better and there are no fees, its popularity has waned. Those who are looking for an investment vehicle should consider their option carefully before choosing to invest in a cmt. While the interest rates may at the moment yield a better rate - but only in some cases - there are still those fees to pay and these could make the proposition a good deal less enticing.

Mel writes about topics such as cmt among other finance related areas.

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