Safety. Capital preservation. Liquidity. For the last five years, CFOs and treasurers managing short-term cash portfolios have pursued those investing objectives to the exclusion of all else, stashing cash in government Treasury bills, agency bonds and bank accounts that earn no interest. For the most part, companies did not deviate from that path — until recently, when some finance executives got comfortable with exposing their cash portfolios to incremental risk.

What is driving companies to break out of being singularly focused on safety? For some, maintaining large balances in cash operating accounts does not make sense anymore, and they seek other ways to earn some kind of positive return. Others are tired of earning near-zero real yield on safe fixed-income investments, especially as their businesses and the financial markets shift out of recession and into a higher gear. Still others have built up such a large cushion of liquidity that they can explore tying up those funds for a year or two because there is no worry of having to tap them in an emergency.

Finally, federal regulators are about to change how CFOs view one popular, relatively safe cash investment instrument. Money-market funds, once the go-to vehicle for short-term cash investing, are on the verge of losing what little appeal they have left, some say, due to new rules proposed by the Securities and Exchange Commission in June.

Many finance executives are wary — and rightly so — of straying from ultra-conservative cash-investing approaches. But trends in fixed income returns and upcoming adjustments to federal monetary policy may have even those executives contemplating new investment strategies.

The Future of Finance Has Arrived

The pace with which finance functions are employing automation and advanced technologies is quickening. Rapidly. A new survey of senior finance executives by Grant Thornton and CFO Research revealed that, for just about every key finance discipline, the use of advanced technologies has increased dramatically in the past 12 months.

Read More

This special report examines how companies can earn a greater yield on their cash portfolios without taking on too much credit and duration risk, and explains what new choices treasurers and CFOs face both in the selection of investment securities and in the decision of how to change their cash investment policies to reflect a new set of financial market conditions.  

Better Than Nothing
Tired of little or no return, treasury departments are once again reaching for yield on their cash balances. Are the risks worth it?

Money-Market Funds Meet Their Waterloo
New SEC rules provide money-market funds with more shock-absorption. But treasurers will think twice before investing in them.

Beyond Money Funds: Other Places to Park Cash
Once the SEC solidifies money market reforms, other investment vehicles could grow in popularity — assuming that finance executives are willing to give up a little liquidity.

Avoiding the Pendulum Portfolio
An investor’s appetite for risk often swings between very healthy and much diminished. But companies can’t afford to let that happen.


Leave a Reply

Your email address will not be published. Required fields are marked *