2 min readExecutive Summary The most compelling argument for total return strategies is demonstrated by a difference of 1.17% in annualized returns between the 1-month and the 1-3 year Treasury benchmarks in the 2005-2014 period. The return difference translates into $13.9 million for a hypothetical investment with a starting value of $100 million. Even though neither of…
2 min readAbstract This research commentary discusses liquidity in the context of corporate cash portfolios, coming challenges in the post-crisis era, why liquidity reversal may be a systemic concern, and how investors should prepare for the new liquidity equilibrium in a normalized interest rate environment. Our suggestions for corporate cash professionals include the following: Review and Revise…
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…
2 min readAbstract In this paper, we discuss the concept and benefits of constant risk aversion in cash portfolio construction. The process may help treasurers understand, gauge and rationalize investment decisions to achieve consistent risk characteristics and to avoid the whiplash that can result from drastic pendulum swings between high-risk and no-risk. The Need for a Constant…
2 min readIntroduction Following 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 investments in certain asset types. Some companies implemented these restrictions by changing their investment guidelines, while others simply gave instructions to…
1 min readAbstract Recent developments in corporate cash investments resulted in portfolios of different risk characteristics having little yield differentiation. Popular cash vehicles, including prime money market funds, FDIC-insured transactional accounts and all-Treasury portfolios, require a fresh look in this new environment. Improving a portfolio’s risk/reward profile may involve diversification among cash vehicles, liquidity and maturity structures,…
3 min readAbstract Treasury rates may remain at zero or negative levels for a prolonged period and additional banks may begin to charge “extraordinary deposits” fees, pushing depositors back into the money markets. It just may be a matter of time before many, if not most, treasurers are confronted with negative portfolio yield. Private and public sector…
2 min readAbstract AAA-rated fixed rate credit card ABS may be viable investments for corporate treasurers. Transparent asset collateral, servicer quality, potential sponsor support, relatively short maturity schedule, and soft-bullet structure are some of the sector’s advantages over other forms of ABS. The credit card ABS sector stood the test of time without significant ratings implications during…
1 min readAbstract With the Fed on hold for an extended period, institutional cash investors need a new perspective on dealing with the prolonged low yield reality. Our four-step guide reminds investors to expect lower yields in the new environment, increase exposure only to securities supported by strong fundamentals, improve yield potential with moderate maturity extension, and…
2 min readAbstract A common misconception of risk diversification may be that additional credits automatically result in a safer portfolio. Today however, one of the primary challenges in developing a successful diversification strategy for short duration investors is a smaller pool of eligible investments. A mad dash into European financial debt, certain sovereign debt, municipal debt, and…