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…
3 min readAs signs of stability returned to capital markets in recent weeks, we’ve begun to hear investors inquire as to how to improve yield in their cash portfolios. We acknowledge that, first and foremost, the return of risk appetite is a welcome and healthy sign after a period of frozen credits and a crisis of confidence….
2 min readExecutive Summary Investment Considerations: Government Sponsored Enterprises Government Money Market Funds FDIC TLGP Guaranteed Debt Foreign Government Guaranteed Debt Beware Certain “Industrial” Credits Institutional cash investors found themselves in a pickle when the market’s desire for safety made treasury securities and treasury money market funds inaccessible. However, when the default option is no longer an…
2 min readThe Aftermath of a Crisis The credit market crunch that started in August 2007 has had a widespread impact on the treasury community’s liquidity management practices. Unlike in any previous market downturns, this credit market crisis started with a popular cash investment vehicle, asset-backed commercial paper, and continued with a system-wide shutdown of another, auction…
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 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 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…
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 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…