Investors in funds billed as “safe havens” have racked up losses of as much as 10% during the credit crunch.

Among the worst hit are investors in Threadneedle’s £450m Money Securities fund, a “cash” fund that over the past year has lost money for its investors nearly every month.

The fund, marketed as a low-risk investment on a par with a building-society deposit account, has fallen almost 4% in value over the past 12 months. In contrast, deposit accounts on the high street are now paying more than 7%.

Other schemes designed to cope with falling markets such as 130/30 funds, which use hedge-fund techniques, have also produced lacklustre figures.

Here we look at some of the promises made and the performances actually achieved.

Cash funds

Cash funds, also known as money-market funds, are sold by many leading fund managers as safe investments with capital preservation as a top priority.

They invest at least 95% of their assets in money-market instruments — essentially deposit accounts or their “near cash” equivalents used by institutions.

These investments have caused many problems. Threadneedle, for example, last year had 40% of its fund in floating notes — bonds issued by institutions that have variable rather than fixed interest rates. As the credit crunch took hold many of these notes were downgraded, causing the value of the fund to fall.

Over the past five years, this “low risk” fund has grown by just under 10% — not enough to keep up with inflation.

“Most people probably do not realise that money-market funds can fall in value,” said Tony Ahearne at Moneyspider, which analyses fund performance.

Most other cash funds are not as exposed to this market as the Threadneedle one, and have delivered a positive return over the year. However, many have produced returns below 5%.

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