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The New Era of Cash Management

2 min read

This book provides chief financial officers and corporate treasury executives with an overview of changes in the cash investment landscape and a guide to more effective hands-on management of corporate cash portfolios. Its three chapters explain: 1) why many investment managers are migrating to separately managed accounts (SMAs); 2) what investment policies for cash management are needed; and 3) how credit and risk factors come into play in this new era.
As the economy improves and interest rates move higher, treasury professionals hoping for a return to the good old days of decent yields in safe investments are finding a new and different world. Today’s cash investment landscape is shaped by higher risk awareness, more sensitivity to liquidity costs and stricter systemic regulation. Dodd-Frank banking reforms, Basel III accords and other regulatory changes have made uninsured bank deposits less attractive than in the past. At the same time, money market fund reforms are expected to increase risk and reduce yields, lessening the attractiveness of institutional funds that previously were regarded as highly reliable, safe and stable investment vehicles for corporate cash.
Taken together, these changes are ushering in a new era in cash management. Treasury professionals increasingly are considering alternatives for managing cash, beyond bank deposits and money market funds. In a return to the direct management approach many abandoned in the 1990s, a large percentage of cash managers are planning to supplement their portfolios with direct purchases of marketable short-term securities in separately managed liquidity accounts. In short, now is the time to start rethinking cash investment strategies.
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Lance Pan joined Capital Advisors Group in 2003. As Director of Investment Research and Strategy, Lance assesses the risk and relative value of asset classes and credits, creates advanced credit approval and surveillance procedures, issues credit opinions, and provides investment strategy recommendations. Lance oversees Capital Advisors Group’s Credit Committee.

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