Invesco is launching a suite of highly liquid cash management ETFs writing that they have a structural advantage that offers the potential for higher returns than are typically available from deposit accounts.
Cash management funds have captured over a third of all fixed income ETF flows since the start of the year, Invesco says, as investors seek for ways to make their cash work harder, particularly with central banks cutting interest rates.
· Invesco EUR Overnight Return Swap UCITS ETF
· Invesco GBP Overnight Return Swap UCITS ETF
· Invesco USD Overnight Return Swap UCITS ETF
Each of the Invesco ETFs will aim to replicate the performance of a Solactive index, less the impact of fees, which reflects the overnight interest rates that banks would pay to borrow from other financial institutions. The benchmark overnight interest rates are calculated and published daily by the ECB, Bank of England or Federal Reserve as appropriate.
The firm writes that the Invesco ETFs leverage the firm’s market-leading swap-based replication model, which was originally launched in 2009 and currently accounts for USD83 billion in client assets across more than 60 funds, including the fifth-largest ETF in Europe. Through this platform, the ETFs aim not only to provide investors with efficient tracking of the relevant benchmark index, but the potential for higher rates of return, effectively outperforming the benchmark.
Matthew Tagliani, Head of EMEA ETF Product at Invesco, says: “Since its launch in 2009, Invesco’s EMEA ETF franchise has anchored its reputation on the efficiency and robust risk management of our multi-counterparty swap-based ETF model. Having delivered superior outcomes for our investors in equity benchmarks for over 16 years, we are delighted to expand our offering to include fixed income exposures to what has been one of the most popular allocations in 2025.”
The funds aim to achieve their objective through the use of unfunded swaps, which are agreements between the fund and its set of approved counterparties, in which the two parties exchange two streams of cash flows. The fund purchases from the counterparty a diversified basket of equities and then exchanges the return of this basket for the performance of the index. To reduce counterparty risk, the swaps will reset every business day with the two parties clearing any outstanding exposures.
Craig Cheesman, Head of EMEA Product Development at Invesco, says: “One of the biggest decisions we faced when developing a cash alternative product was how to deliver reliable returns with high liquidity. By leveraging our swap-based ETF platform, we can obtain attractive terms from our counterparty banks because we provide them a means to finance equity positions on their books. This means the banks are willing to provide compelling swap economics to the fund, which results in an excess return above the benchmark.”
Paul Syms, Head of EMEA ETF Fixed Income and Commodity Product Management at Invesco, says: “We expect this type of liquid, overnight return product to be particularly attractive to investors who have excess capital sitting idly in cash, possibly waiting to redeploy it into risk assets or who are in the middle of portfolio transitioning. Our new ETFs allow those investors to remain out of the market while still earning a highly competitive yield and without having to take on duration and other risks associated with cash management funds that generate their yield by holding fixed income securities.”
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