2 min readAbstract Our recent participation at the Securities and Exchange Commission (“SEC”) roundtable discussion on money market funds and systemic risk gave us the impression that the government is moving closer to a policy draft on money market fund reform. Despite overwhelming complaints, the floating net asset value (“NAV”) approach remains a top choice for the…
2 min readIn May, Capital Advisors Group was invited to the Securities and Exchange Commission’s headquarters in Washington, D.C. to participate in a roundtable discussion on money market fund risk and to help consider potential policy changes for money market funds (the archived webcast can be found here). After years of publishing research on money fund risk,…
1 min readManaging corporate cash with the objectives of capital preservation, liquidity, and return is often thought of as a staid and steady endeavor. However, in reality, buy lists need to be actively adjusted to preemptively manage credit risk. Over the last 12 months, credits have been affected by, among other things, earnings reports, regulatory reform, and…
2 min readAbstract Credit risks in prime money market funds stem from investments in non-government securities. In reviewing credit concentrations in a group of AAA-rated prime funds representing 50% of industry prime fund assets, we found that fund managers improved credit and liquidity positions by boosting investments in U.S. Treasuries and repurchase agreements. As of December 31,…
3 min readMeet the New Year, same as the old – with a twist. In preparing our treasury investment strategy outlook for 2011, it seems there isn’t much we have not already seen or experienced in 2010 – an exceptionally low interest rate environment, the Eurozone sovereign debt crisis, and a wave of financial regulations. Indeed, we…
3 min readIntroduction As 2010 draws to a close, we cannot help but take note of the sea change in how corporate treasurers are managing their cash portfolios since the capitulation of the financial markets in September 2008. If we characterize 2008 as the year of “shellshock” and 2009 as one of “bunker mentality,” 2010 clearly is…
2 min readIntroduction As far as financial weather conditions go, the past few months represented very unusual patterns for financial regulators, who broke the usual summer doldrums with a number of regulatory gales. While the new regulations will likely have a profound and lasting impact on our financial lives, most of us are simply overwhelmed by the…
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 This paper attempts to quantify the impact of a liquidity premium in money market funds by modeling three hypothetical portfolios of 29, 60, and 121-day weighted average maturities (WAM). Through our modeling process, we found the WAM extensions would have resulted in 0.11% and 0.31%, respectively, of additional annual yield potential over the 29-day…
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…