2 min readAbstract As the money market fund industry moves to comply with the SEC Rule 2a-7 amendment, the 60-day maximum maturity prime fund concept has received much public attention. For institutional cash managers faced with a chasm between government and prime funds, the 60-day prime fund may represent a viable middle ground and a market-based solution…
1 min readSeptember brought us a new war, escalating Russian sanctions, renewed equity volatility and a close call on the Scottish succession; all certainly a reminder of the complexities and challenges that can arise at any moment. As the month unfolded, we started fielding questions on the credit impact of these events, which financial institutions would be…
2 min readAbstract An effective counterparty strategy must provide clarity on counterparties’ credit strength, individually and collectively, and have a desired “benchmark” level. Changing credit landscapes, aggregation challenges and inconsistent and irregular policy practices are just some of the challenges facing treasurers transitioning from a reactive counterparty risk management practice to a proactive benchmarked approach. The difficulty…
1 min readRegulatory reform has been a constant presence in the world of cash investments over the past five years, and it’s had a significant impact on credit risk, supply and return. As the dust from the credit crisis began to settle, most short-term investments including bank deposits, money funds and commercial paper were, by necessity, wrapped…
2 min readAbstract The Johnson-Crapo bill represents another concrete step towards the resolution of the future of Fannie Mae and Freddie Mac and one that will further reduce the supply of government agency debt. This presents a serious challenge to the management of cash portfolios due to the core holdings status of agency debt. Money market fund…
2 min readSubtle language changes to the Fed’s official statement and comments from Janet Yellen’s first press conference as Chair shifted the anticipated timing of a Fed funds rate hike to the first half of 2015. The dot chart that maps FOMC members’ interest rate predictions showed that the majority expect the first rate hike to come…
2 min readAbstract Make whole calls caused little investor concern until the low yield environment resulted in unexpected losses. Make whole provisions fail to protect short-term investors when bond spreads fall below make whole levels. Yield volatility in Treasury securities complicates matters and increases risk for cash investors. Make whole bonds are generally not considered callable, and…
2 min readAbstract Counterparty risk management should have an integrated framework. While utilizing a separately managed account may help reduce a corporation’s concentration risk in a money market fund, it also may be an important tool to reduce enterprise level counterparty risk. A portfolio of securities not correlated with the firm’s largest credit exposures may help diversify…
1 min readThis past month we wrapped up our third webinar on counterparty risk management, finishing the three part series we began last October. Our goal of the webinar series, hosted by ourselves and Strategic Treasurer, was to raise awareness of the challenges treasurers face in managing counterparty risk and, as a thought leader in the industry,…
2 min readAbstract In this research commentary, we offer a behind the scenes look at the credit approval process for cash investment portfolios. We discuss nine essential components to help clarify a process that can sometimes seem mysterious and intimidating. Beyond Ratings – What Makes Cash Unique The Credit Universe – It’s All About Supply Preliminary Screening…