2 min readIntroduction Since late 2008, when the $3.5 trillion money fund industry was left reeling in the wake of the Reserve Primary money market fund’s failure, a number of regulators have warned against systemic risks that institutional money market funds still pose to the financial system. In September 2008, as the tidal wave of news spread…
2 min readAbstract The challenging environment for treasury cash investments has prompted many practitioners to look for alternative options in managing their excess cash. We address this topic in a generalized manner, summarizing three major categories of available cash investment vehicles: deposits, pooled assets and direct purchases. The pros and cons of each vehicle type are discussed….
2 min readAbstract We set out to answer 10 of the most common questions related to writing investment policy statements (“IPS”) for cash portfolios. In doing so, we will provide a number of peer group data comparisons to add insight into the process. The treasury investment management landscape has undergone significant changes. We found that investors tended…
2 min readExecutive Summary The complementary use of commingled and separate accounts may help in optimizing corporate cash management. The percentage of corporate investors considering money market funds as permissible investments has been declining since 2009, while the permissible use of separately managed accounts has been climbing. Six Advantages of Separately Managed Accounts: Tailored Risk Management Transparency…
3 min readAbstract We propose a variable Net Asset Value (NAV) approach based on a dual-NAV structure to preserve the transactional utility of money market funds. This approach would require funds to publish daily intrinsic NAVs up to the 4th decimal place, and would allow shares to be traded at rounded NAVs (RNAVs) up to the 2nd…
2 min readAbstract Recent negative bank ratings actions foretell a secular trend that capital markets-oriented banks are slipping toward the lower tier of investment-grade categories. We believe these ratings downgrades are more than a temporary phenomenon that is easily reversible. While the near-term effect on corporate treasury portfolios will likely be manageable, long-term ramifications require more investor…
1 min readAbstract Recent developments in corporate cash investments resulted in portfolios of different risk characteristics having little yield differentiation. Popular cash vehicles, including prime money market funds, FDIC-insured transactional accounts and all-Treasury portfolios, require a fresh look in this new environment. Improving a portfolio’s risk/reward profile may involve diversification among cash vehicles, liquidity and maturity structures,…
2 min readIntroduction One short year ago, we discussed three key trends for 2011: low interest rates, a spreading sovereign debt crisis and persistent financial regulation. And we started our 2011 commentary with the phrase, “meet the New Year, same as the old.” Have we caught you in a moment of déjà vu? For 2012, we see…
3 min readAbstract For four decades, many corporate treasurers successfully employed a hands-off approach to managing the money market funds in their portfolios. However, recent market events revealed the danger in this approach. Like other investments, money market funds must be evaluated to determine how they fit into a firm’s overall risk management strategy. A money market…
2 min readAbstract Separate accounts may offer greater return and reduced credit risk compared to prime money market funds. By examining current and future liquidity needs and the potential for significant deviations from cash flow projections, corporate treasurers may construct portfolios with direct investments in high-quality credits that provide current, future and emergency liquidity – and still…