In this article we quickly describe and analyze the performance of FZFXX, Fidelity’s Treasury Money Market Fund. We also look at other cash management options available at Fidelity.
FZFXX executive summary
- FZFXX is a money market fund operated by Fidelity focused on investing in treasuries.
- It’s one of a few options Fidelity offers for its clients to use as their core cash position. A core cash position is the cash uninvested money in an account that is used to settle transactions in/from that account.
- It’s not available for all account types at Fidelity, particularly not non-brokerage accounts. We also haven’t seen it available in retirement accounts, although Fidelity lists it as available in “Retirement accounts and simple IRAs.”
- According to it’s prospectus, it will invest 99.5% of assets in cash, US treasuries, and repurchase agreements.
- Performance: annualized return since inception in 1983 has been 3.17%, while inflation over the same period averaged 2.77%. So in real dollars investors have historically averaged about a 0.5% return.
- Like other investments, this is not FDIC insured. Although this is about as close to risk free as an investor can get, there still is technically the possibility of loss of principal. Fidelity does have an FDIC insured cash position option, which does earn a small return like a savings account would.
- Other core position cash management options at Fidelity include:
FZFXX: ok, what precisely is this fund?
FZFXX is a money market fund operated by Fidelity, which intends to earn a small premium by investing in ultra-safe securities like US treasuries and repurchase agreements. This is similar to most money market funds, whose primary goals are capital preservation and liquidity. While those are the two primary goals, they do invest, rather than let the money sit, in order to make a small return and to prevent the erosion of capital through inflation.
At writing, the fund was made up of approximately ~85% repurchase agreement, ~10% treasury coupons, ~3% t-bills, and ~2% other instruments. Interestingly, it’s the weighted average time to maturity was an ultra-short 4.0 days!
Most investors think of funds like this one as a place to keep cash that they will need in the near term. Although it does earn a small return above inflation, most investors will be able to find much better risk-adjusted returns elsewhere for medium and long-term holding targets.
Performance: historically, FZFXX just barely eeked out inflation by half a percent
While a big return is not typically what investors are seeking in most money market funds, it’s still nice if you can get something above inflation for your money. Over its 40+ lifespan that’s just about what FZFXX has done, averaging ~0.5% return above inflation. While this isn’t too exciting it does feel reliable to see that it has stood the test of time over so many market cycles.
We think of this fund as being roughly equivalent to buying into a 3-month treasury. In fact, below you can see that the performance over several different time periods checked is in line with just that (albeit slightly less).
How does FZFXX stack up to other core cash position options at Fidelity?
Out of Fidelity’s 3 main core cash management options, FZFXX is right in the middle. We like FDRXX a little better, but it’s not offered with every account.
- SPAXX: return essentially breaking even with inflation.
- FZFXX: return of about 0.5% over inflation.
- FDRXX: return of about ~1% over inflation.
For a money market fund, all of these returns are acceptable, since the most important quality is capital preservation, which all of these funds have accomplished. Investors should bear in mind to check the return over inflation though, so as not to be fooled into thinking they can get a near risk free ~3-4% ROI.
Focus on: is this fund liquid?
Liquidity is one of the primary aims of most or all money market funds. Investors expect and demand to be able to exchange their investments for cash at a moment’s notice with a money market fund. To that end, FZFXX holds the vast majority of its investments in securities that mature in less than a week. In fact, most of their assets appear to be overnight repurchase agreements.
This combined with the fact that the fund hovers around ~$35B in assets, but daily flows appear to be almost always less than about $1B, should give most investors peace of mind.
FZFXX basic stats
Last word: are we using FZFXX for cash management?
We do in fact use FZFXX in at least one of our Fidelity accounts. We think it’s a solid option for core cash position management and have been happy with it so far.
Cody is the founder and owner of Personal Finance Guru. His day job is as a management consultant at one of the Top 3 firms (think Mckinsey, Bain), where he advises Fortune 500 C-suite clients on their most important and pressing business problems. He completed his business education at Harvard Business School.
After seeing the lack of personal finance education for regular people, Cody started the website with the mission to provide everyone access to information that will help them achieve their financial goals.
Cody approaches personal finance from a maximalist perspective, shunning typical advice around simply not buying a cup of coffee instead of more effective methods like investing in yourself to quickly grow your income.
He believes in saving money and investing for the future, but he also knows that you need to enjoy life today. That’s why Cody approaches money with a sense of humor and a positive attitude. He knows that if you’re not having fun while you’re growing your wealth, then what’s the point?
Cody approaches life with the same gusto that he brings to personal finance. He loves to travel and experience new cultures, and he is an avid reader and learner. He also enjoys playing sports (especially tennis) and spending time with his family and friends.