Be careful before investing in cash PIEs

Investors need to be aware that the products aren't simply a cash deposit, and that they share some of the characteristics of finance company debentures, said principal Mike Newton. While quality issuers such as ASB Bank, which invests its portfolios back into its own bank deposits, aren't a worry, some of the non-bank funds require closer scrutiny.

"Don't be ignorant again," said Newton. The concern is that some managers "will start adding high-earning assets to their portfolios" and investors won't be aware of the increased risks, he said.

The scrap for term deposits is making it difficult to attract funds, and Newtown is concerned some portfolio managers will introduce riskier asset classes into their PIEs to keep money flowing in.

Investors should be wary of funds with wide and varied asset classes, and people need to be aware of what assets the product holds, and also what it's open to holding, Newton said.