Changing Investment Landscape

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Each January our newsletter focuses on the likely challenges that cash investors will face in the coming year. Given how much has transpired in the treasurer’s world since the beginning of 2013, we thought that an update on the issues facing cash investors would be helpful.

On June 5th the SEC voted unanimously to propose rules that would reform the way that money market funds operate to make them less susceptible to runs. The public comment period for the SEC’s proposal has begun and is scheduled to expire on September 17th. The process of reform could take two years or longer. During this time, it will be important to understand the impact of reform and the possible alternatives to money market funds if reform significantly compromises the utility of money market funds.

On June 19th, the FOMC statement and Chairman Bernanke’s comments following the FOMC meeting indicated that the Fed saw a slight improvement in economic conditions, but more importantly, provided clarity on how and when Fed policy would change, particularly with respect to quantitative easing. The FOMC statement, Bernanke’s comments and the subsequent market reaction may be an indication that we are beginning to emerge from the low-rate environment that began with the 2008 financial crisis. Recent moves in interest rates also provide a reminder that longer-term fixed income positions remain vulnerable to the eventual rise in rates.

In this month’s research, we discuss the above developments and others, as well as insights gleaned at the recent Crane Money Market Fund Symposium in Baltimore.

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Best Regards,

Ben Campbell
President & CEO

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