It’s Time to Focus on Credit and Risk Management

1 min read

With new rules for prime money market funds coming and Basel III banking reforms already here, many corporate cash managers are seeking alternatives. Major banks are limiting corporate cash deposits in response to new liquidity coverage ratio (LCR) requirements, and prime money funds will have new, less-attractive risk/reward profiles when they institute SEC-mandated floating net asset values (NAVs), liquidity fees and redemption gates in October. That’s why 52 percent of corporate treasurers polled in last year’s AFP Liquidity Survey said they were considering direct ownership of cash investments in separately managed accounts (SMAs) instead.

But as more companies invest directly in fixed-income securities, the burden will fall on them to ensure their assets are safe and liquid. Unlike money market funds, with shared liquidity of pooled assets that the fund oversees, separately managed accounts are directly purchased and owned investments. Therefore, Treasury professionals who start investing directly, or who work with a Registered Investment Advisor to manage their separate accounts on their behalf, need to keep their fingers on the pulse of the credit markets and put in place well-defined risk management protocols.

Our June whitepaper is an update of our time-tested look at “Nine Elements of Credit Approval for Cash Portfolios.” In it we discuss the essential components of risk and credit management for cash investments and help clarify a process that can sometimes seem mysterious and intimidating. It’s must-reading for any cash investor with individual securities or a separate account portfolio.

In the meantime, we will keep an eye on the June 14-15 Federal Open Market Committee deliberations on a possible interest rate hike. Stay tuned.

DOWNLOAD FULL REPORT

Best Regards,

Ben Campbell
President & CEO

Please click here for disclosure information: Our research is for personal, non-commercial use only. You may not copy, distribute or modify content contained on this Website without prior written authorization from Capital Advisors Group. By viewing this Website and/or downloading its content, you agree to the Terms of Use & Privacy Policy.

Similar Posts

dark mysterious landscape with many doors

Asset-Backed Securities in Cash Portfolios: Worth the Effort or Unnecessary Complexity?

Credit & Risk

18 min read18 min readFinancial markets have closely monitored consumers’ financial health following the COVID-19 pandemic to gauge when the exceptional economic tailwind provided by high levels of household savings would fade. Accounting for roughly two-thirds of GDP, consumer spending was juiced by pandemic era stimulus programs which ballooned household savings. These savings were later depleted as…

SMA website image

Credit Insight: The Backbone of Counterparty Risk Management

Credit & Risk

10 min read10 min readAbstract Changing credit landscapes, more complex financial products, multiple touchpoints with large financial intermediaries, and high profile bank failures are just some of the challenges treasury management professionals and cash managers face in counterparty risk management. An effective counterparty strategy should provide clarity on the counterparties’ credit strength individually and collectively, and have…

Credit Implications of The Digital Markets Act

Credit Implications of The Digital Markets Act

Credit & Risk

9 min read9 min read Introduction On March 7th, 2024, the European Commission (EC) began enforcing the Digital Markets Act (DMA), one of the most sweeping antitrust policies for Big Tech to date. Yet despite the broad scope covered under the legislation, the market reaction was relatively muted. This suggests a belief that the companies’ operational changes…

Apple Q2 Earnings: Share Buybacks, China, and AI

Apple Q2 Earnings: Share Buybacks, China, and AI

Credit & Risk

2 min read2 min readFor the quarter ending March 30th 2024, Apple reported net income of $23.6B, down 2.2% year-over-year, on revenues of $90.8B which were 4.3% lower over the same period. The change in revenues reflected a 14.2% increase in services revenue and a 9.5% decrease in product revenues. Of particular note, iPhone sales which accounted…

The Empire Strikes Back: Return of Oil and Gas Dominance for U.S. Integrated Energy

The Empire Strikes Back: Return of Oil and Gas Dominance for U.S. Integrated Energy

Credit & Risk

5 min read5 min readIntroduction Earlier this year, European oil majors BP and Shell announced that they would roll back their energy transition plans and keep oil and gas as relatively large parts of their portfolio. In October 2023, their American counterparts Exxon Mobil and Chevron doubled down on a collective $115 billion bet on fossil fuels….