Cash and carry

As credit spreads continue to widen, panic sellers should consider higher yielding cash vehicles which can offer more handsome returns than simple bank deposits.

Jason Kabel, manager of the F&C Enhanced Cash Fund, said today's news that BNP Paribas, which only last week said it was unaffected by the crisis in the US sub-prime mortgage sector, had suspended three of its funds, was a pain for credit markets and a further blow to equities which were gradually losing investors to cash.

"BNP's decision to suspend three Asset Backed Securities funds because problems in the US sub-prime mortgage sector prevent them from calculating their value will send more jitters through the market.

"But those who do not want to be stuck on base rate levels of return and want to invest their cash more effectively, should consider enhanced cash funds. These are designed to generate a yield above the rates available in the money market," he said. The F&C Enhanced Cash Fund has a target return of 3-month LIBOR plus 35 basis points gross of charges, calculated on a 3 year rolling basis.