2 min readExecutive Summary This update to our original whitepaper published in April 2006 seeks to answer two questions: 1) Are prime funds getting safer? 2) Are all prime funds alike? The general risk profile of the large prime fund group has improved since our last publication. The average fund now has better liquidity, better credit quality…
2 min readExecutive Summary Tip No. 1: In a market that lacks liquidity, CPFF means liquidity. Tip No. 2: When a firm can no longer access CPFF, liquidity may deteriorate rather rapidly. Tip No. 3: Despite the appearance to the contrary, not all CPFF-eligible issuers are the same. Tip No. 4: CPFF eligibility and credit ratings are…
2 min readExecutive Summary A. Recent market turmoil uncovered rising systemic risks among money market funds: Regulatory rules failed to adequately address investment risks Defending the constant $1 share value became more difficult Money funds as commingled vehicles have inherent drawbacks B. Key factors in money market fund selections: Focus on the wherewithal of the funds’ sponsors…
3 min readIn light of this week’s failed vote on the Troubled Asset Relief Program (TARP), we wanted to share some credit considerations with you. Companies may want to evaluate non-2a-7 bank money market deposit accounts (MMDA’s) with balances greater than $100,000, the FDIC coverage limit per bank (the FDIC insurance limit may increase to $250,000 if…
2 min readNow into our 18th year of working with treasury managers across the country, it’s as clear as ever that managing risk remains one of the least understood and most challenging areas of corporate cash management. The treasury landscape is littered with painful examples of write-downs from highly rated securities whose risk was miscalculated, misunderstood, or…
3 min readExecutive Summary Prior to the recent credit crisis, strong criticism of money market funds taking on too much risk could easily have been dismissed as fear mongering. With strong (but now dubious) triple-A credit ratings, constant $1 per share prices, daily liquidity, strong brand recognition, and deep-pocketed parents, what was not to like about money…
3 min readIntroduction In its most basic form, investing is all about understanding and managing risk. For fixed income securities, it’s more about managing credit and interest rate risk. And, understanding credit is of particular importance for corporate cash investors whose primary concerns are principal stability and liquidity, while attractive yield potential is often a secondary concern….
2 min readExecutive Summary The concurrent use of commingled and separate accounts may help in optimizing corporate cash management. In corporate cash management, separate account management has a limited following – about 20% vs. 76% in money funds and 22% in other funds. Six Advantages of Separately Managed Accounts: Tailored Risk Management Transparency Higher Return Potential Free…
2 min readIn April 2007 increasing losses sustained by bonds with exposure to subprime mortgages became apparent. [See “The Subprime Flu,” April 2007] In the months that followed, this brought on a widespread credit contagion and took many investors by surprise. Among the hardest-hit areas was the short-term credit market that came to a screeching halt in…
2 min readExecutive Summary Ratings don’t tell the whole story. A basket of bad apples won’t make a good pie. Hidden leverage may sneak up on you. Not all repos are alike. Extension risk may cost you more. Structured notes equal speculation. Do you want to “buy” or “sell” protection? Hedge funds are not for the faint…