Oct 25, 19

Money fund providers and corporate cash managers gathered in Boston earlier this week for AFP 2019, the Association for Financial Professionals’ Annual Conference. Perennial topics like safety, liquidity and yield, along with recent market events, were discussed, as well as a new dose of technology, portals and ESG. We briefly quote from a couple of the sessions below, and we also review the latest money fund asset totals.

During the session, “Beyond Trading: Exploring Portal Capabilities,” hosted by Tom Knight of Institutional Cash Distributors (ICD)Mark Sahler of Jeffries commented, “Obviously, being in treasury, some of the needs that we have are being able to preserve liquidity and to have a nimble way to move cash from money funds, FX investments and to create an opportunity for us to move money without the use of banks and borrowing.”

He explained, “[​With] cash optimization, there are a lot of opportunities. We don’t just use the money fund portal; we invest in very large FX funds. I invest in securities, … Treasury funds, money funds, Prime…. Being an investment bank, we need to mobilize cash properly on a more daily basis than some other firms. We can buy large pools of securities that would require us to come in and out…. We use the money fund portal primarily to obtain those objectives. I have larger balances in money funds than a lot of corporates have for that reason — because it’s just easier.”

On portals, Sahler added, “​From a risk management perspective, you can see across your pools of investments. You can see what your potential risk is, what your asset risk is and your concentrations in a lot of different sectors…. We can get into and out of 20 or 30 funds in a pretty easy way using the money fund portal. The other thing about the coordination…. Stability is key, and liquidity…. You really need to get to the cash in a quick way. You need to take a more offensive approach to portfolio liquidity.”

Another panelist, Matthew Post of Qualcomm told the audience, “On the money fund side, we do have offshore US dollar funds, we use both prime and government domestic 2a-7 funds…. Offshore … China, for example, has a lot of our short term liquidity, so we usually stagger between having bank deposits and having money funds for our short-​term investments…. We have currently about $10-or-12 billion in cash and cash equivalents. I’​d say about two-​thirds of that is in money market funds.”

He continued, “We want to make sure we have large funds so that we can carry larger positions and not have to worry about liquidity. We have a limit of 5 percent maximum in aggregate…. We do have quite a lot of money funds that we have invested in across the space … at least a dozen or so…. That way we have diversified funds.”

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