What does cluster risk mean and how can CashPlus SME reduce it?

Concentration risk refers to the risk associated with the concentration of investments in a single asset or asset class. If an investor invests their money primarily in a particular asset or asset class and that asset or asset class experiences a negative performance, this can lead to significant losses. Diversification is often recommended as a means of reducing concentration risk as it spreads the risk by spreading the portfolio across different asset classes and assets.

A cluster risk can also arise in a bank account, as the statutory deposit protection only applies up to €100,000 and funds above this amount are at risk of default if the bank becomes insolvent. In contrast, the Goldman Sachs Asset Management money market fund is very liquid with an invested volume of over €20 billion and invests the money in a globally diversified manner, significantly reducing the cluster risk compared to investing in a bank account.

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