2 min readAbstract A well-structured separately managed account may serve liquidity investors better than money market funds, especially when faced with uncertain interest rate prospects and opportunity costs. Given historical fed funds and LIBOR rates, a moderately structured hypothetical SMA portfolio outperformed a hypothetical MMF in each of the last three rate tightening cycles. Today, SMAs may…
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 readAs goes the real estate mantra, “location, location, location”, so liquidity is paramount to corporate treasurers. It’s etched predominately as a primary objective into almost every cash investment policy that we’ve ever reviewed. So, with the Fed’s latest round of quantitative easing set to wind up in just 45 days, all eyes were on Chairperson…
1 min readThe SEC’s announcement last week that institutional prime money market funds will soon incorporate floating NAVs, along with potential fees and gates on liquidity during times of stress, ends nearly five years of discordant regulatory deliberations. During that time, Capital Advisors Group has been active in the assessment of money fund risks through our FundIQ®…
2 min readAbstract Greater vigilance is required of today’s treasury investment professionals. Neither bank deposits nor money market funds may be appropriate in the post-crisis, post-regulatory environment. As yields start to rise, cash investment strategy decisions that may have been delayed will require serious consideration. Direct purchases in separately managed accounts may become the primary alternative cash…
1 min readSurvey goal To shed light on treasury departments’ efforts to mitigate liquidity risk in short-term cash investment, debt and forecasting practices. What we’ve learned in 2014 Treasury and financial professionals appear to have begun to control bank exposures Decrease in bank deposits Firms seem to have increased the pace at which they negotiate and renegotiate…
1 min readThe evolution of risk management practices has been impressive over the last quarter century. The industry has gone from risk reports printed on curly fax paper to integrated counter party risk management systems. As practices have evolved, the complexities of risk management have evolved as well. To capture these trends, Capital Advisors Group along with…
1 min readCFOs, treasurers, analysts, and other financial management decision-makers have made in-roads in mitigating risk by increasing restrictions on which banks can hold their uninsured deposits and updating their investment policies frequently. But despite progress in both understanding and managing counterparty risk, many organizations still do not appear to have formal counterparty risk exposure policies or…
1 min readMoney market funds and bank deposits have been traditional sources of liquidity for corporations. However, the unlimited FDIC guarantee on non-interest bearing deposits expired more than a year ago and money market funds have come under scrutiny from both investors and regulators. With the SEC scheduled to announce its final regulatory changes this year, which…
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…