Bundled FDIC Deposits Provide an Alternative to Floating NAVs, Fees and Gates

On October 15, institutional cash investors entering the uncertain world of floating net asset values (NAVs) on institutional prime money market funds may be looking for alternative liquidity vehicles. While government money market funds may be the first obvious choice because they will still offer stable NAVs and no redemption fees or liquidity gates, increased demand may depress yields and/or create supply shortages. A closer look at the new cash management landscape reveals another choice – a liquidity vehicle designed with the goal of providing safety, liquidity and competitive performance, backed by the full faith and credit of the federal government.

Insured Deposit Programs (IDPs) bundle deposits from multiple banks, each insured up to the $250,000 limit by the Federal Deposit Insurance Corporation (FDIC), into a single trust account at a custodial institution providing next-day access to your funds. In recent years, a number of third-party providers with automated trading and accounting platforms, with trust banks acting as master account custodians, have developed programs that streamline the cumbersome process of bundling insured deposits as packaged offerings.

This month’s Capital Advisors Group research report – Demystifying Insured Deposit Programs: The Other Government Cash Management Alternative – helps demystify this often overlooked liquidity option, discussing its pros and cons and explaining why now may be an appropriate time to consider it. At the same time, we’re pleased to announce our newest cash-management solution, Capital Advisors Group Insured Liquidity Accounts^SM, designed to provide convenient access to deposits backed by FDIC insurance. We expect many corporate cash investors may find it to be a suitable alternative to floating-NAV prime money funds.

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Best Regards,

Ben Campbell
President & CEO