3 min readExecutive Summary Superior returns do not happen by chance all the time, so it is relevant to identify active strategies to help achieve them. We focus on the three broad investment strategies used by most fixed income managers: duration management, sector rotation, and credit selection. Excess return potential from active duration management can be sizeable,…
2 min readExecutive Summary As 2006 drew to a close, corporate cash investors found themselves in a surprisingly benign market. Despite the 100 basis-point increase in the Fed funds rate, major short-duration bond indices brought in positive returns almost universally. As managers of corporate cash investments, we picked five trends that reflect what we feel may have…
2 min readExecutive Summary We set out to answer 10 of the most common questions related to investment policy statement writing for cash portfolios. In doing so, we will provide a number of peer group data comparisons to further add helpful insight in the process. The questions address the following investment subjects: Maximum liquidity limits Minimum credit…
2 min readIntroduction The CFA Institute, an investment industry trade group formerly known as the Association for Investment Management and Research (AIMR), establishes and interprets the AIMR Performance Presentation Standards (AIMR-PPS) in North America. In more than a decade since their introduction, an increasing number of investment managers have voluntarily complied with the new standards that promote…
2 min readExecutive Summary Results of three studies examining investment returns show that, in aggregate, investors with tax rates above 23% received higher returns from tax-exempt securities than from taxable investments over the last nine years. The annual return advantage for taxpayers in the top tax bracket (35%) was approximately 0.26%. While the results of the studies…
2 min readExecutive Summary Few financial executives have a firm grasp of what liquidity means in a portfolio of individual cash assets. The two main criteria in measuring liquidity are: 1. how long it takes to convert an asset to cash, and 2. how much of a price “haircut” must be taken on the sale. The Top…
2 min readExecutive Summary There are generally two ways of calculating investment returns. Mutual funds, pension plans, and investors with total return objectives predominantly use the market value based method. Money market funds, cash portfolios, insurance accounts and investors seeking income stability tend to rely on book value based returns. Sometimes, an investor may use a type…
2 min readExecutive Summary The most compelling argument for total return strategies is demonstrated by a difference of 1.73% in annualized returns between the 1-month and the 1-3 year Treasury benchmarks in the 1995-2004 period. The return difference translates into $26.6 million for a hypothetical investment with a starting value of $100 million. Even though neither of…
2 min readExecutive Summary The auction rate securities (ARS) market may be on the verge of a systemic meltdown after the recent PriceWaterhouseCoopers’ FAS 95 & 115 interpretations of ARS as long-term investments. Corporate cash managers may exit the ARS market. At a minimum, firms will likely scramble to comply with the new interpretation, experience technical defaults…
3 min readCorporate 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 factor…