1 min readIt appears that in a few weeks’ time, the Janet Yellen Fed may finally tighten the reins on the slightly anemic but well-employed U.S. economy. If economic reports stay neutral-to-positive through December, we could see the first Fed funds interest rate hike since the mid-aughts. This shift has been seen before, causing repercussions that reverberated…
1 min readAbstract Institutional prime money market fund investors may face a number of liquidity challenges after October 2016. Floating net asset values, potential fees and gates on redemptions and unpredictable institutional shareholder behavior during times of stress all present potential obstacles. Cash investors may be able to avoid these difficulties with direct investments in cash equivalent…
2 min readThis 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…
2 min readOctober brought a string of articles in the Wall Street Journal and other financial publications highlighting the impact money market fund reform and liquidity coverage ratios may have on corporate cash investments. The gist of these articles was that after years of little environmental change, treasurers are now faced with significant modifications to both prime…
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…
1 min readAugust’s surprise devaluation of the Yuan touched off market volatility not seen in years (I watched the Dow tick down over 1000 points on August 24). While all eyes were on the world’s second-largest economy, we were monitoring cash safe havens of old and pondering how new cash vehicles might handle the past month’s volatility….
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 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…
1 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 satisfy current, future and emergency liquidity needs – and…