2 min readAbstract Bank deposits have always represented the main cash management vehicle for institutions. Growth in deposits and money market fund balances crisscrossed each other over recent decades. Recent financial regulations, notably the liquidity coverage ratio, net stable funding ratio and G-SIB capital surcharges, caused deposit dynamics to change, reducing banks’ appetite for non-operating deposits. We…
2 min readAbstract This commentary addresses a number of liquidity challenges concerning institutional prime money market funds after October 2016. The floating net asset values, the provision of fees and gates and the institutional shareholder syndrome each presents a unique set of challenges. The reformed institutional prime product can remain viable for a certain population of current…
1 min readIntroduction Corporate treasury managers are frequently confronted with the task of picking the right benchmarks for their cash portfolios. Unlike stocks and long bonds, a market-based index is often too long or too risky for cash investments. Some treasurers resort to comparing “yield” earned on investments on the assumption that it is the only relevant…
2 min readResearch Highlights The ratio of roughly 3 to 1 single-A vs. double-A issuers suggests a liquid market sector and potential for better risk diversification. Average one-year default probability by a single-A corporate issuer was 0.1% in the last 10 years. Investing in single-A securities would have incurred cumulative credit losses of 1.1% over a five-year…
2 min readExecutive Summary ABCP can still be a good investment choice in large corporate treasury accounts due to the liquidity, flexibility, and yield potential of the asset class. Most traditional multi-seller conduits persevered through the recent financial crisis. Despite low issuance and investor skepticism, the mechanism of ABCP structures improved due to new regulatory measures. Potential…
2 min readIntroduction At first glance, the task of measuring investment returns of corporate cash portfolios seems relatively straightforward, since they most typically invest only in “plain vanilla” securities and have limited numbers of transactions. Treasury practitioners, however, often tell a different tale of performance measurement. One frequent complaint involves apples-to-oranges performance comparisons between money managers. Another…
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 to the process. The treasury investment management landscape has undergone significant changes. We found that investors recently…
2 min readAbstract BBB and Tier 2 rated debt instruments have evolved to a much larger presence in the short-duration corporate debt market than a decade ago. Default experiences and rating migration data suggest moderately higher credit risk than A-rated instruments, while expected returns also were higher. This ratings category opens up an opportunity set not found…
2 min readExecutive Summary The most compelling argument for total return strategies is demonstrated by a difference of 1.17% in annualized returns between the 1-month and the 1-3 year Treasury benchmarks in the 2005-2014 period. The return difference translates into $13.9 million for a hypothetical investment with a starting value of $100 million. Even though neither of…
1 min readAbstract Greater vigilance is required of today’s treasury investment professionals. Neither bank deposits nor money market funds may be appropriate in the post-crisis, post-regulatory environment. As yields start to rise, cash investment strategy decisions that may have been delayed will require serious consideration. Direct purchases in separately managed accounts may become the primary alternative cash…