A guide to active cash management


15 minutes reading

Actively avoid the risks of hidden, unproductive or idle cash

With the cash rate at its highest in over a decade and ongoing investor uncertainty about financial markets, the focus on cash allocations is growing. Given the higher yields now available, there could be an opportunity cost to holding idle cash.









The opportunity cost of idle cash

For advisers, now is the time to actively manage cash allocations. The cash rate is at its highest in over 10 years, and yield curves are relatively flat – the base case for our Macquarie Banking and Financial Services group Investment Strategy team suggest we are likely at the end of the tightening cycle and the RBA may have scope to start lowering interest rates from August this year1.

With a holistic view of each client’s cash requirements and holdings, you can see opportunities to optimise client returns, and in turn share insights to strengthen relationships.

“Cash and fixed income investments are the ballast in a diversified portfolio,” says Steve McKenna, Investment Strategist in Macquarie’s Banking and Financial Services group. Cash can help reduce the impact of market volatility and protect against losses. It also provides essential liquidity.

In the current market, idle cash could be missing out on greater returns – or delaying clients from achieving their wealth goals.

“Our latest outlook indicates we are now at, or close to, the peak of interest rates, and there’s an expectation we may be going into a slowdown,” says McKenna. “At some point in the second half of 2024, RBA cash rates will likely move downwards again. And that means, from an investment perspective, locking in rates now is a relatively attractive proposition.”

Cash has always played a critical role in a diversified investment portfolio. In times of uncertainty, investors see cash as protection against risk – yet they may not perceive cash as an asset requiring advice.

This guide explores the current cash opportunity. It will help you have meaningful conversations about cash management with your clients and make the case for greater visibility of their total cash holdings.









Defining active cash management

Steve McKenna says he’s seeing a heightened sense of uncertainty about the economic environment, along with uncertainty over when cash may be needed – even among high-net-worth investors.

“You need to get the balance right. Just as you would with any part of your investment portfolio, it’s important to rethink what is locked away at a higher rate, and what you might need for short-term payments.”

Whether rates are zero or 5%, it’s important to actively manage cash allocations. 

Steve McKenna
Investment Strategist, Macquarie’s Banking and Financial Services group

Broadly speaking, we can establish a framework with three types of cash:

01 Transactional cash

Cash on hand to meet day-to-day expenses, typically across a six-month horizon. Given the impact of inflation on the cost of living, now’s the time to revisit client budgets. Are they still realistic? Could that cash at call be earning more in a high interest account?

02 Medium-term cash

When you know the timing of a capital call or are preparing for an investment opportunity, you could afford to put cash in a term deposit. This tends to be a 6-to-12-month view of cash requirements and could also be seen as a safety net.

03 Strategic cash

Strategic cash allocations seek to maximise returns for longer time frames, typically with a trade-off for liquidity. Until recently, the role of cash as a defensive play had been diluted by the lack of return. In today’s markets, there are opportunities for stronger returns without taking undue risks.

“The key is to never let that transactional cash run down completely, or your client could be forced to sell an asset or call on a term deposit before maturity,” says David Barrett, Head of Macquarie Technical Advice Solutions.

“What clients need in short-term cash today may be more than a year ago, so it’s important to have that conversation,” he explains.

That’s why it’s also never been more important for advisers to have visibility across all cash holdings.









How is the appetite for cash changing?

Since 2020, investors have shown an increasing preference for stability. According to the 2023 ASX Investor Study, 67% of investors say they prefer stable or guaranteed returns. And they’re shifting funds into cash.

Self-managed super funds (SMSFs) are even more inclined towards capital preservation and income generation. On average, 22% of SMSF assets are allocated to cash – across transaction accounts, cash management accounts (CMAs) and term deposits. The proportion of SMSFs holding money in CMAs has surged in the past year, and 33% of SMSFs intentionally increased cash allocations in 2023.2

Cash is also popular among high-net-worth investors, with 40% of Australia’s private banking clients allocating funds to cash or cash equivalents and 37% investing in money markets, fixed interest and bonds.3

But not all cash is ‘zero-risk’ cash. Only deposits with ADIs (Authorised Deposit-taking Institutions), and up to $250,000 per account holder per ADI, are government-guaranteed per the Financial Claims Scheme (FCS).

When rates were close to zero, investors chasing higher yields found themselves moving further up the risk spectrum into cash-equivalent investments – at a liquidity cost. Cash equivalents include term deposits and investments which are defined by APRA as “short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.”

However, other income-producing assets – such as corporate bonds or residential mortgage- backed securities – don’t meet the definition of cash. 

Weighing up cash options

Bank accounts – transaction or savings accounts which pay interest regularly and provide unrestricted access to funds. This convenience can come at a cost: once inflation is factored in, the real return on at call cash could be negative. There is also a concentration risk for holding large amounts of cash with a single ADI.

Cash management accounts (CMAs) – as a cash investment hub, a CMA provides the benefits of a transaction account with greater visibility and control for advisers. Some, like Macquarie's Cash Management Accelerator Account linked to Macquarie’s CMA, may offer higher interest rates than an everyday bank account. They may even compare favourably with a term deposit without sacrificing liquidity.

Term deposits – with a fixed rate of return, investors often see term deposits as a disciplined way to save money. Terms can range between one month and five years, and if funds are accessed early there may be a ‘penalty’ in the form of lost interest or a break fee. Term deposits with an ADI are eligible for the $250,000 per client government guarantee.

Cash alternatives – some managed funds could be considered as ‘true-to-label’ cash and can act as a cash alternative in a portfolio. For example, the Macquarie Cash Fund (MCF) offers an actively managed transactional cash solution provides exposure to a portfolio of highly rated cash and short-term fixed interest securities issued by government or bank entities. The FCS does not apply to cash funds.

It’s important to check whether some funds labelled ‘cash’ are authentic alternatives to cash, or align more with the characteristics of income funds, as this could expose clients to liquidity or capital risk4.

“In the Macquarie Cash Fund (MCF) we only include securities that seek to provide the risk and return characteristics of cash, but investors should be aware that managed funds are higher risk than cash and unlike certain cash deposits, there is no government guarantee applicable to investments in the fund” explains Beth Wallace, Macquarie Fixed Income Senior Portfolio Manager.

Cash alternative red flags

You should investigate further to confirm a fund is true to label ‘cash’ if it has some of the following features:

  • T+1, 2 or 3 availability – cash funds should allow same-day access
  • A buy/sell spread
  • Performance fees as well as management fees
  • Weighted average of credit ratings
  • If it invests in Residential Mortgage-Backed Security (RMBS) or corporate holdings.









Actively managing liquidity

It has never been more important to understand your clients' expenditure and time horizons, especially if they are feeling uncertain in the current economic climate.

“The ultimate downside risk is running out of money,” says Barrett. “For clients nearing retirement, it’s important to work backwards from what they need to spend at that life stage. Be conscious of withdrawal rate modelling: if you don’t want to run down the balance, a safe withdrawal rate is as low as 2%.”

Retired clients with an SMSF also need to have enough cash on hand to meet pension requirements. And liquidity may be just as important to younger clients with investments outside of super, who may have higher or fluctuating family and living expenses.

Laddering redemption dates can be a useful strategy for term deposits. Instead of depositing one lump sum in a single term deposit, you could spread the capital across different durations. As each deposit reaches maturity, you can decide whether to reinvest or reallocate.

Example: Warren

It’s important to help clients understand the terms and conditions of a term deposit, and check it meets their needs. Interest rates can also vary widely, based on term and amount invested.

Warren is worried he may be made redundant due to a restructure at work. He has $50,000 in a 6-month term deposit, which he has been rolling into a new term deposit each time it matures. 

His current term deposit is maturing in 2 weeks’ time and Warren was considering rolling it again because it seems to be the easiest option. However, his adviser Kate reminds him he would need to give the provider 31 days’ notice if he wanted to access the funds before maturity. The provider is offering 4.1% p.a. for the new 6-month term deposit, however if Warren breaks the term early, he will incur fees and receive an interest adjustment. 

What’s more, Warren could earn close to the same, or in some cases a higher interest rate in a cash account, where the funds can be accessed at call.

Once Kate explains this option, Warren feels more comfortable depositing his term deposit funds into the high interest cash account on maturity – knowing that if he is made redundant, he can draw on those rainy day funds straight away.









Your clients’ hidden pockets of cash

Cash holdings grew during the COVID-19 pandemic, as confidence in equity markets weakened. Household cash reached near historic highs – and at that time, advisers told us they had full visibility over less than half of their client base’s cash holdings.5

That’s why there’s a possibility you lack the full picture on all your clients’ cash. And now is the time to check, because the rates that were acceptable in 2021 are not competitive today.

Example: Anita and Graham

A high interest-bearing account could help clients achieve their goals sooner, as the effect of compound interest can be substantial.

Anita and Graham opened a savings account in 2020 to save a deposit of $180,000 for a new home. At that time the account wasn’t paying any interest, and now they are receiving 0.5% pa. They have saved $60,000 and are saving $26,000 every year.

Their adviser Paul was unaware of this strategy, until they asked him why it was taking them so long to reach their goal. He showed them modelling for a few options offering much higher rates, and they decide to move their deposit to a high interest account paying 4.5% pa.

This allows them to save their deposit eight and a half months sooner – which, given the rise of house values, could make all the difference in securing their dream home.









Get started with active cash management

Macquarie’s CMA has been a trusted cash hub for over 45 years and is used by close to one in three Australian SMSFs to manage their money. It can be linked to the higher interest Macquarie Cash Management Accelerator Account, as well as term deposits, for a holistic view across cash holdings.

As a fully integrated cash ecosystem, this makes it easier for advisers to set up a sophisticated cash maximisation strategy, and have more time to focus on more complex investment options.

 All our clients’ cash inflows and outflows pass through their Macquarie CMA. That allows us to measure cash flow quickly and painlessly – and what gets measured gets managed. 

Lisa Kirk
Head of Wealth, Fuse Wealth

For Fuse Wealth, a CMA takes the guesswork out of managing client expenses, as it automates data feeds into XPlan. Third-party authorisations enable advisers to initiate cash transfers, with approval alerts sent to the client’s phone to ensure security. 

Learn how Fuse Wealth uses CMAs to optimise cash allocations, and bridge the gap between advice and implementation. Read more

In summary


Cash may be a secure portfolio allocation with relatively predictable returns, but it still needs to be managed proactively – especially in today’s market, where cash flow demands may be less predictable and rates of return vary widely across different providers and cash products.

A cash hub like Macquarie’s Cash Management Account can make it easier for you to proactively manage other investments as well. With liquidity, visibility, security and third-party authority, you can be sure your clients’ capital is working as hard as possible by taking advantage of opportunities as they arise.

Contact us today to learn more about how we can help your business stay ahead.

Learn more about the Macquarie Cash Management Account and Accelerator account.

To discuss any opportunities for your business, please request a call.

Additional Information


1 Market Commentary | Insights | Macquarie Group
2 2023 Investment Trends. 2023 SMSF Investor Report: Industry Analysis
3 Australia Private Banking Council research – April 2023
4 ASIC, September 2020, ASIC tells funds managers to be ‘true to label’
5/sup> Cash Management Adviser survey conducted by Zing Research on behalf of Macquarie, August 2019 n=541


The information in this report was finalised on 24 January 2024.

This information is provided by Macquarie Bank Limited ABN 46 008 583 542 AFSL 237502 (MBL) for the use of financial services professionals only. In no circumstances is it to be used by a potential client for the purposes of making a decision about a financial product or class of products.

This information is not personal advice and has been prepared without taking into account any person’s personal objectives, financial situation or needs. We recommend financial, legal and taxation advice before making any financial investment decision. Past performance is not a reliable indicator of future performance.

The Macquarie Cash Management Account, Macquarie Cash Management Accelerator Account and Macquarie Term Deposits are deposit products issued by MBL.

The information relating to the Macquarie Cash Fund ARSN 090 715 236 is provided for general information purposes only and is not, and should not be construed as, an advertisement, an invitation, an offer, a solicitation of an offer or a recommendation to participate in any investment strategy or take any other action, including to buy or sell any product or security or offer any banking or financial service or facility by any member of the Macquarie Group. This information has been prepared without taking into account any person’s objectives, financial situation or needs. Recipients should not construe the contents of this document as financial, investment or other advice. It should not be relied on in making any investment decision.  In deciding whether to acquire or continue to hold an investment in the Fund, an investor should consider the Fund’s offer document. The offer document is available by contacting us on 1800 814 523. Please review the Target Market Determination for the Fund available at macquarieim.com/TMD and consider if the Fund may be suitable for you. 

Sample case studies are purely hypothetical and do not indicate actual or potential returns, estimates, projections or forecasts for investments. Any assumptions may have a material effect on returns. The actual performance of investments will depend on changes in economic conditions, investment management and tax legislation.

The analysis provided in this report is based on information obtained from sources believed to be reliable but we do not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Any opinions expressed are subject to change without notice. No member of Macquarie accepts any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of such information. We make no guarantee concerning the accuracy of data and information contained on third party websites.

Except for MBL, any Macquarie entity referred to is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Cth). That entity’s obligations do not represent deposits or other liabilities of MBL. Any investments are subject to investment risk including possible delays in repayment and loss of income and principal invested. MBL does not guarantee or otherwise provide assurance in respect of the obligations of that entity, unless noted otherwise.