2014: A Year of Transition

As 2013 closes and we pen our annual “Three Challenges in the Coming Year” research paper, I thought that a self-evaluation of our previous year’s views would make for an interesting exercise. Last year at this time, we cited acceleration in money fund reform, scarcity of eligible investments and the low rate environment as the predominate challenges for corporate cash investors. As we predicted, money fund reform accelerated quickly in 2013 with the comment period for a proposed floating NAV for institutional funds (along with fees and gates) expiring quickly in this past September. We currently anticipate that a reform proposal may be released as soon as the first quarter of 2014. With an anticipated two year implementation period, whatever the final outcome of the proposal, investors will have ample time to consider their alternatives, including separately managed liquidity accounts. Secondly, a scarcity of high grade investments presented challenges to investors as the issuance of AA2 bonds declined 26% last year on the heels of a 51% decline in 2012. The result was an increase in counterparty risk for organizations without much offset of return. Please review our thoughts on the difficulties of managing overall counterparty risk in an ultra-low rate environment.

We welcome 2014 with a preview of how the changing cash management landscape is likely to impact treasurers. While many of the issues we identified in 2013 will continue to affect the market, the key themes that will challenge corporate cash investors in the upcoming year include the aftermath of financial regulations, the anticipation of a steeper yield curve and the proliferation of innovative products. In this month’s whitepaper, we take a deeper look at each of these key themes and attempt to identify the overall impact on corporate cash portfolios.

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Best Regards,

Ben Campbell
President & CEO