14 min readCo-authored by: Matthew Paniati Abstract The past few years have been mostly predictable for investors, with an expanding economy accompanied by steadily rising interest rates and asset prices. In this two-part series, we examine some recent developments and their implications for the current environment. In part two, we look at the current state of fiscal…
2 min readFor corporate cash investors managing portfolios during an economic expansion, “what goes up, must come down” is a good rule to live by. The current decade-long expansion in the U.S.—among the longest on record—has defied that maxim so far. But as it matures into old age, risks for investors are reemerging. Our November white paper,…
12 min readCo-authored by: Spyros Qendro, CFA Abstract The past few years have been predictable for investors, with an expanding economy accompanied by steadily rising interest rates and asset prices. In this two-part series, we look at some recent developments and their implications for the current environment. In part one, we look at recent equity market volatility,…
2 min readA growing number of institutional cash investors seeking higher returns are turning to direct investments in commercial paper. Why? In part because prime money market funds no longer deliver an optimum combination of liquidity, safety and yield as they did in the past. Among other things, the SEC reforms two years ago resulted in a…
13 min readAbstract Many liquidity investors came to know commercial paper (CP) through holdings in prime money market funds (MMFs). We notice higher interest in direct CP investing since the 2016 MMF reform. This paper provides an overview of the market over the last decade and evaluates financial vs. non-financial, U.S. vs. foreign, and Tier 1 vs….
2 min readCorporate cash managers by necessity are amongst the most conservative of investors. Before optimizing yield potential, they must often worry first about ensuring liquidity while reducing risk. That’s why in the aftermath of the 2008 credit crisis, corporations hunkered down almost exclusively in government-issued and government-backed debt. For a time, many stopped parking their cash…
5 min readFollowing the collapse of Lehman Brothers in 2008, the rapidly deteriorating economic environment in the U.S. and abroad caused most treasurers to reevaluate their cash investment strategies, with a specific focus on restricting investment in certain asset types. Some companies implemented these restrictions by changing their investment policies, while others simply gave instructions to their…
10 min readAbstract The evolving treasury cash investment landscape and yield disadvantage of bank deposits have prompted many practitioners to look for alternative options for managing their excess cash. We address this topic in a generalized manner, summarizing three major categories of available cash investment vehicles: deposits, pooled assets and direct purchases. The pros and cons of…
2 min readIf you’re a cash investor waiting for bank deposit yields to catch up with the Fed’s interest rate hikes, don’t hold your breath. The so-called “deposit beta,” which measures how fast banks raise their rates as a percentage of the increase in the federal funds rate, has risen at a snail’s pace compared to previous…
9 min readAbstract Deposit rates are starting to increase as we move further into a rising rate environment. Banks still have not rewarded depositors sufficiently with a 21% average deposit beta, although some executives expressed moving it above 50%. The wait for higher rates continues unless depositors are willing to consider market-based instruments. There, several options exist…