2 min readNovember ushered in chilly winds as a result of the Fed’s controversial QE2 program as longer-term interest rates shifted higher, raising questions about the unintended consequences of the program. The controversy arrives just as the nation heads into the holiday season, which traditionally is a time to reflect upon the year nearly behind us. Looking…
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…
3 min readTrading desks across the country serve as conduits through which corporations and banks look to fund their balance sheets. A morning spent on a short term trading desk can be an eye opener for anyone seeking yield opportunities. I like to compare it to the act of peering into a bakery window – you may…
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…
2 min readIf the mantra in real estate investing is location, location, location, then the rule of cash investing is diversification, diversification, diversification. The importance of this discipline can be seen in lessons found in the Auction Rate Securities market, certain banking sectors and in selected geographic credit exposures where either liquidity or credit issues can become…
3 min readLast week’s unveiling of the long-awaited new rules governing money market funds prompted a flood of commentary from the fund industry and reports from the financial press in a matter of just a few days. This month, we wish to focus specifically on how we believe the changes will have profound ramifications on all short-duration…
2 min readInvestment Considerations We think there may be a shorter than expected timetable for Fed rate hikes and that it may be prudent to keep a portfolio of shorter maturity bonds and floating rate securities. This strategy also applies to money market funds with shorter weighted average maturities (WAMs). We believe yield levels may rise causing…
2 min readWelcome to the New Year edition of The Capital Advisor. Another year is now behind us (one that many are happy to put in the past) and a new decade lies before us. I’m particularly eager to see what the future may bring as those of us focused on the day-to-day management of corporate cash…
3 min readOver the past two years, as we anticipated the credit cycle downturn, we gradually and methodically worked to reduce credit exposure in our managed portfolios. In light of the dramatic capital markets disruptions and the extreme market illiquidity after the bankruptcy of Lehman Brothers, we temporarily ceased purchases of all non-government guaranteed debt. Additionally, we…