The best and worst: Cash trusts beat banks

CASH unit trusts can offer higher interest rates than bank and building society accounts because they invest in the wholesale money markets.

The average cash unit trust turned pounds 100 into pounds 103.01 during the last six months. According to the index of leading building society rates compiled by Micropal, pounds 100 in a building society share account six months ago would now be worth pounds 100.66. The same amount in a 90-day-notice account would be worth pounds 102.8 and in the societies' highest paying accounts, pounds 103.46.

Many cash trusts require a minimum deposit of, say, pounds 1,000, and while the money is theoretically available instantly it cannot be withdrawn over the counter in the high street.

Also, since cash trusts invest in the wholesale money market, rates change more quickly than on bank and building society accounts.

The bigger a deposit on the wholesale markets, the better the rate available, and the giant Prudential Corporation is well placed to get the best deals for its pounds 36m Cash Haven trust. In the middle of last week, the trust was paying 8.8 per cent gross.

The Govett MIS Cash trust only uses the overnight money market, so cannot benefit from better rates available on deposits with longer terms. This is because it needs to ensure that funds are available quickly to satisfy investors moving in and out of Govett's Bull and Bear futures-linked unit trusts.

Fidelity's pounds 70m cash trust also benefits from its size. Last week it was paying a little over 9 per cent gross.

Lazard's top-paying Money Market trust is open only to institutional investors.

----------------------------------------------------------------- Table: Cash Unit Trusts ----------------------------------------------------------------- The best Pounds 1 Lazard Money Market 104.40 2 Prudential Cash Haven 103.91 3 Baring Cash 103.75 4 Midland Money Market 103.69 5 Fidelity Cash 103.66 The worst 28 Sovereign Cash 101.71 29 Crown Cash 101.50 30 Prov Capitol UK Money Market 101.43 31 Scot Amicable Maximum Income 101.36 32 Govett MIS Cash 98.53 ----------------------------------------------------------------- Value of pounds 100 on 1 October 1992, invested on 1 April 1992. Offer- to-bid, net income reinvested. Source: Micropal -----------------------------------------------------------------