We set out to answer 10 of the most common questions related to investment policy statement writing for cash portfolios. In doing so, we will provide a number of peer group data comparisons to further add helpful insight into the process.

Financial executives often consider liquidity as a major investment objective for their excess cash accounts. Few, however, have a firm grasp of what liquidity means beyond daily access to a money market fund. The Top 10 Liquidity Factors may provide useful tools during the security selection process. Additionally, investors may benefit from the Six Steps to Better Liquidity in portfolio construction decisions.

Surveying the bruised credit landscape, we think the pendulum of "irrational exuberance" has swung from excessive greed to extreme fear. Where there is fear, there lies opportunity. Let's look at three bond investment areas that may offer just rewards without comprising safety and liquidity.

The recent growth of web-based portals took the popularity of fund investing to a new level. The events of the past summer, however, brought the argument for separate account management back to the front-burner for many corporate investors. In this paper, we point to a number of advantages of a separately managed account (SMA) relationship to further this discussion. We believe that the right answer is not an "either or" decision, but rather the simultaneous use of both strategies in optimizing cash management solutions for the corporate investor.

There exists a long list of factors that led to the credit market crunch of 2007, including: easy money after years of low interest rates, record corporate profitability, rapid home price appreciation, relaxed mortgage underwriting standards, overextended and speculative home buyers, increased use of derivatives and leverage by investors, perhaps undeserving AAA credit ratings... The list goes on.

In this article, we summarize our observations of increased risk in the cash and money market fund industries into eight broad categories. With the recent market jitters, we hope to remind investors that risk and return are two sides of the same coin. Checking for potholes should not be a one time event, but rather an ongoing exercise while the vehicle is on the road.

As managers of corporate cash investments, we picked five trends that reflect what we feel may have the greatest impact on highgrade, short-duration, and buy-and-hold traditional corporate cash investment accounts.

Profitable corporations and other taxpaying entities naturally need to consider cash and short-term investments in their overall tax management strategies. From time to time, as shown by empirical and anecdotal evidence, the treasury management community may fail to fully appreciate the tax implications of short-term investment returns.

An inverted yield curve can be damaging to bond investors as it often means lower income potential for bonds with higher interest rate risk. Particularly exposed are corporate cash portfolios with buy-and- hold strategies that derive most, if not all, of their returns from the income component. In this report, we set out to examine previous interest cycles where the yield curve inverted itself, in hopes of learning what to expect in short and long-term interest rate movements for the remainder of the year.

As fixed income investors, we are thrilled to see short-term securities yielding above 5% for the first time in five years. Meanwhile, we are equally aware of the risk of locking in today's levels if the Fed continues to raise rates substantially higher. In keeping with our tradition of reviewing today's interest rate environment within a historical context, we set out to observe the time period from three months prior to the Fed's adoption of a neutral monetary policy stance to the beginning of the next easing cycle.

In addition to being back by the full faith and credit of the US government, TIPS can be an excellent way for investors to protect the future real purchasing power of their investment. TIPs offer a bond portfolio good diversification and liquidity.

In this study, we will discuss some of the common screening criteria in finding which A and AA-rated corporate issuers may fall prey to private equity firms. Based on these criteria, we also produced two lists, one financial and one non-financial, of likely candidates from which investors can conduct research and apply their own judgment.

In this credit commentary, we share with readers the SEC's findings regarding the tactics that enabled broker-dealers to preserve a "zero" auction failure rate. We also assess the impact of the disciplinary action and proposed regulatory changes for investors in this market, who may hold or are considering holding these "cash" investments in their core portfolio holdings.

This paper seeks to answer the following questions: what institutional money market funds are: why invest in them; whether the funds are really safe; whether they have gotten riskier over the years; and how investors should select a right fund.

Without delving too much into technical details, we will provide a brief introduction to ABCP, highlight some of the common advantages and risks of the traditional programs, and provide a practical guide for ABCP risk assessment. We believe ABCP are legitimate investment vehicles in large corporate treasury accounts due to the depth, liquidity, flexibility, and yield potential of the market. We also think that the wide range of risks among programs requires dedicated credit expertise and regular asset collateral monitoring when investing in ABCP.

The auction rate securities (ARS) market may be on the verge of a systemic meltdown after the recent PriceWaterhouseCoopers' FAS 95 & 115 interpretations of ARS as long-term investments.

This paper analyzes the relative risk and reward characteristics of ABS investments in relation to corporate bonds from the vantage point of a short-duration corporate cash manager. We also offer a highly condensed introduction to the security class and some practical considerations when using ABS in a cash portfolio.

Last April, when Google Inc. unveiled its plan to use a Dutch style auction in its initial public offering, it brought the popularity of this peculiar way of setting securities prices to a new height. Meanwhile, a sea change has been taking place for several years that promises to redefine how debt issuers tap the short-term fixed income market. Due to limited public awareness of the potential risks involved, this quiet storm may catch an unsuspecting corporate cash manager by surprise.

Broker-dealers market Auction Rate Securities (ARS) to corporate clients as yieldier alternative investments to high quality cash management vehicles. While the securities' yield advantage over very short-duration (generally 28 or 35 days) bonds is possible, the brokers often fail to point out the price an investor pays in terms of liquidity given up, opportunities lost along the yield curve, as well as accounting complexity. We examine the seven claims broker- dealers frequently pitch to corporate investors, and the facts about the true risk and reward of ARS.

This is an updated version of our corporate research piece first published in February 2004. It draws new data from recent market and rating agency releases to illustrate potential risk and return benefits of single-A rated bonds over double- A securities. Its primary objective is to help corporate cash portfolios with double-A investment policies to gain some level of comfort with the credit exposure of single-A securities.

Merck's fall from grace highlights the need to address event risk -- a risk that inundates even the most experienced risk managers throughout credit cycles. Here, we offer some perspectives on dealing with this type of risk for corporate cash investors.

The latest debacle at Fannie Mae is perhaps the deadliest in its existence as a Government Sponsored Enterprise (GSE) and could ignite a firestorm that may result in dramatic makeovers at the very heart of the organization. As a corporate treasurer, should you sell your Fannie Mae bonds or should you buy more because the yields are higher? Should you be oblivious of the financial headlines if your goal is to hold your investments to maturity?

Although the standards have evolved over time, the fundamental intent of the CFA Institute remains intact - to provide a fair representation of a manager's discretionary investment capabilities by avoiding cherry-picking "model", or "representative" accounts. Since performance measurement is a very important aspect of investment process, we would like to present a few points that may help to better clarify what it means to be AIMR-PPS compliant.

Corporate treasury managers are frequently confronted with the task of picking the right benchmarks for their cash portfolios. Unlike stocks and long bonds, a market-based index is often too long or too risky for cash investments. Some treasurers resort to comparing "yield" earned on investments on the assumption that it is the only relevant factor in a "buy-and-hold" strategy. We want to offer our take on choosing appropriate benchmarks for corporate cash portfolios.

At first glance, the task of measuring investment returns of corporate cash portfolios seems relatively straightforward, since they most typically invest only in "plain vanilla" securities and have limited numbers of transactions. Treasury practitioners, however, often tell a different tale of performance measurement.

Today, due to increased competition from the growing number of funds and lenders, loan terms have become more competitive and advantageous for borrowers. The venture debt market, however, is constantly evolving causing it to be difficult for CFOs to keep pace with the ever changing lenders and loan structures.

As the stock market continues its volatile trend and media highlight stories of institutional investors and banks taking heavy losses from subprime fallout, the venture debt market has, thus far, weathered the storm and remains largely unaffected. This healthy market in fact, is enjoying positive growth as companies continue to leverage their expensive equity funding with less dilutive debt financing.