The Aftermath of Reform

With sweeping changes coming to short term cash markets, along with a likely Fed policy shift, now is the time for a bottom-up reevaluation of cash investment strategies. Regulatory changes are altering the risk-reward relationship of the most staid solutions in cash markets, as old products are reinvented and new ones introduced.

It’s been over three years since Capital Advisors Group participated in the SEC’s round table discussion on money market fund reform. In the end, the 2014 regulatory adjustments went farther than many expected that day; the mutual fund industry lost its battle to prevent floating NAVs, redemption fees, and liquidity gates. With the reset of SEC rules looming in 2016, the fund industry is back at the drawing board for a reset of their product solutions. Outside of money market funds, regulation is also impacting bank deposit strategies, as Basel III creates disincentives for banks to hold non-operating deposits.

Rule changes could provoke over a trillion dollars in asset shifts over the next year, impacting the liquidity, yield and utility of most cash instruments. After several years of watching from the sidelines, we believe treasurers have reached a critical stage where evaluation should give way to implementation. We will be hosting a series of Webinars to explore the regulatory changes and discuss strategies to effectively position cash investments in this new era. In the interim, this month we look at the new 60 day prime funds to showcase the broad evolution already underway in the fund industry.

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Best Regards,

Ben Campbell
President & CEO