Looking Beyond Bank Deposits and MMFs

The cash management landscape for treasurers changed distinctly from December to January. Behind the equity headlines, short yields jumped to levels not seen in years as the Fed adjusted policy and the short curve steepened. This shift in yields is certainly a welcome event, as the 2016 “to-do” list for many treasurers may include investigating alternatives to prime money market funds. New regulations, including floating net asset values (NAVs) and the possible imposition of liquidity fees and redemption gates, are set to take hold in the fourth quarter. In the meantime, the new environment provides motivation to investigate alternatives to prime money funds. With higher interest rates, opportunity costs for those with under-deployed cash, and earned-income potential increases for investors positioning just outside of money funds. The pace of additional rate increases will depend on the employment and inflation trends the Fed cited in its decision to raise rates in December. But, if and when future increases do come, they may amplify the opportunity costs of delaying a move to prime money fund alternatives. So with higher yield potential already at hand, now is the time to craft a strategy and investigate alternatives to prime funds as the reform deadlines approach. To help facilitate this investigation of new cash management strategies, this month’s research looks beyond bank deposits and prime money funds to examine alternative strategies that may help investors take full advantage of this new era in cash investing.

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Best Regards,

Ben Campbell
President & CEO