Is my money safe with DEGIRO?
Your money will be received at DEGIRO by a separate foundation. If you do not directly invest this money it will be automatically invested in one of the Money Market Funds. This is done via the standing order given by you during the registration process.
Money Market Funds
DEGIRO believes that it is important that clients understand how the structure of these Money Market Funds works. DEGIRO is not a bank but an investment firm. In the Netherlands, investment firms are not allowed to hold the money of clients. Therefore, when you become a client of DEGIRO, you give a standing order to invest money into a Money Market Fund. As such, at DEGIRO you do not hold money. For every currency available in the trading platform, a separate Money Market Fund is also available. The objective of a Money Market Fund is to realise a return that is equal to the market interest rate with as low risk as possible. An additional advantage to the low risk, is that your Money Market Fund participations, just like your other investments, are kept strictly separate from the assets of DEGIRO.
Money Market Funds are often used by institutional investors, such as pension funds, to hold large amounts of money in a safe way. Approximately €1 trillion is currently being held in Money Market Funds in Europe. (Source)
"The objective of a Money Market Fund is to realise a return that is equal to the market interest rate with as low risk as possible."
Fund providers
DEGIRO provides its clients with two Money Market Fund providers, depending on the currency you hold funds. These providers are FundShare Fund Management and Morgan Stanley Investment Management.
Morgan Stanley Investment Management
The Morgan Stanley Liquidity Funds are available in the currencies EUR, USD, and GBP. The Morgan Stanley Liquidity Funds are qualified Money Market Funds with an AAA rating and large in size, more than €20 billion. Morgan Stanley Investment Management is part of one of the largest business banks in the world.
FundShare Fund Management
The FundShare Cash Funds are managed by FundShare Fund Management. FundShare Fund Management manages qualified Money Market Funds in EUR, USD, GBP, CHF, SEK, NOK, and DKK.
Management and investment policy
The fund managers of both FundShare Fund Management and Morgan Stanley ensure that the funds comply with strict requirements.
Risk
The main objective of a Money Market Fund is to minimise risk. With the strict investment policy, this risk is very low. According to the Key Investor Information Document (KIID) of the funds, the risk level is a 1 on a scale from 1 to 7.
For more information on the risks and the risk indicator as determined by the fund manager, we refer you to the prospectus, position reports and Key Investor Information Document (KIID) prepared by the fund manager on the website of FundShare Fund Management and Morgan Stanley Investment Management. The website of Morgan Stanley disclaims that their website is not for retail clients. Note that this is due to the fact that the Morgan Stanley Liquidity Funds are generally not targeted to retail clients. The Qualified Accumulation D and Qualified Distributing share classes have been made especially for offering to retail clients by investment firms such as DEGIRO. The KIIDs can also be found in our document centre.
Please note: losses caused by these risks will not be compensated by DEGIRO. If you invest, you run a financial risk. The value of your investments may fluctuate. Results achieved in the past do not guarantee future performance.
Costs, return and compensation of the Money Market Funds
Investing in a Money Market Fund is low risk but has a downside, namely in the form of a low return. For a few currencies, this return is currently negative, due to the negative market interest rates for short-term EUR bonds. Among others, the EUR Money Market Fund currently has a negative return.
While any positive return on your investment into a Money Market Funds is yours, a negative return as a result of the current interest rates and fund costs is partially compensated by DEGIRO on a non-committal basis. Money Market Funds have no entry and exit costs.
Compensation Policy Money Market Funds
As the GBP Money Markey Fund currently has a positive return, the compensation policy may not impact you at this time. Positive returns from the MMF are yours to keep. Nevertheless, we would like to inform you of these changes in the event that the GBP MMF’s return becomes negative or you hold a currency on your account, such as EUR, that currently has a negative return. In case the return becomes negative, DEGIRO compensates the negative return of the MMFs of your base currency (GBP), furthermore:
Compensation will only be given for the first £2,000 in MMF holdings and only for the Morgan Stanley EUR Liquidity Fund.
If you have paid £300 or more in transaction fees during a 60-day period, a limit of £90,000 will apply to you. This will be reviewed on a monthly basis.
When you become a client you give the standing order to invest your cash balance into the Morgan Stanley GBP Liquidity Fund.
We wish to stress that DEGIRO, as well as the holding company behind DEGIRO, in no way receives any (financial) benefits (inducement) from Morgan Stanley Investment Management for the selection of these Money Market Funds. This is done because DEGIRO deems it wise to offer Money Market Funds that are managed by an administrator outside of the holding of which DEGIRO is also a part.
Below you can find an overview (as of the end of June 2020) of the fund returns, the KIID and the prospectus For the most accurate returns of the funds, please see the website of the fund manager.
| Return per June 2020 | KIID | |
|---|---|---|
| Morgan Stanley Money Market Funds | ||
| EUR | -0,53% | KIID |
| USD | +0,23% | KIID |
| GBP | +0,16% | KIID |
| FundShare Money Market Funds | ||
| EUR | -0,64% | KIID |
| USD | +1,04% | KIID |
| GBP | +0,10% | KIID |
| CHF | -1,02% | KIID |
| SEK | -0,41% | KIID |
| NOK | +0,46% | KIID |
| DKK | -0,79% | KIID |
Results achieved in the past do not guarantee future performance. For the most recent returns please see the website of the fund manager.
Please note: the compensation given by DEGIRO is on a non-committal basis. DEGIRO is not obliged to do so and can change or end the compensation at any moment. Of course, we will always communicate such changes to you. The compensation only applies to negative returns as a result of negative interest and management costs. The loss suffered from an investment made by the fund will not be compensated by DEGIRO. This risk is low.
Questions?
With Money Market Funds, you run credit risks just as with a bank. The portfolio is after all invested in bonds (loans). However, Money Market Funds, and in particular qualifying Money Market Funds, adhere to very strict investment policies. Investment is only allowed to be made in bonds with a very high credit ratings and a short duration. The credit risk is therefore very limited. The deposit guarantee scheme does not apply to Money Market Funds. However, their low risk applies for assets of both above and below €100,000. That is why Money Market Funds are often used by institutional parties to hold large amounts of money in a safe way. In total, approximately €1 trillion is currently held in Money Market Funds in Europe.(Source). Moreover, your investment in Money Market Funds is just as safely separated from DEGIRO as all your other investments at DEGIRO.
For many clients, the market interest rate of their local currency will be negative. We want to prevent our clients from being affected by this negative interest as much as possible. That is why we have decided to partially compensate on a non-committal basis the negative return in the Money Market Funds as a result of the interest and management costs.
It is possible that the value of a Money Market Fund falls as a result of losses suffered on an investment made by the fund. This can occur if, for example, the Dutch or German state can unexpectedly no longer meet its payment obligations. In such a case, DEGIRO will not offer any compensation on the losses incurred. This risk is however very low.
The compensation is entirely non-committal and does not create any rights and does not oblige DEGIRO to follow the same approach in the future. DEGIRO pays this compensation on the basis of commercial considerations. DEGIRO reserves the right to waive this compensation. DEGIRO will inform you ahead of time in the case of such changes.
As the GBP Money Markey Fund currently has a positive return, the compensation policy may not impact you at this time. For more information about the compensation policy, please click here.
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