Transcript [Presentation Title/Subject]

Short-term Investing for Corporations
Idaho Association for Financial Professionals
May 13, 2008
Rick Sabones, Director, Global Liquidity & Investments, Citi
Overview & Agenda
Is it possible to achieve optimum returns given risk, liquidity and yield expectations in today’s
current market?
Overview: First, with the financial and credit market turmoil that has persisted in the
markets since August, the focus for cash investments has been on safety, preservation of
capital and liquidity. The discussion will focus on maximizing the efficiency of your cash,
the various investment options available and how current market conditions affect the
decision process.
Agenda:
 Money Market Review
 Corporate Investment Practices
 Automation
 Money Market Funds-Rule 2a-7 and “AAA” Ratings
2
Money Market Review
3
Feb. – Aug. 2007 Headline Risk ABCP Illiquidity
• Sub-prime mortgage
market turmoil begins
• MMF’s begin to
assess indirect
exposure
• IKB and its ABCP
conduit Rhineland come
under attack
• KfW rescues IKB by
agreeing to assume its
liquidity obligations to
Rhineland
• IKB injects Euros 80
million of capital into its
SIV, Rhinebridge
August 10th – Fed reminds
market discount window is
available as a source of
funding
August 9th
August 6th- 8th
Mid-July
•American Home
files for bankruptcy
and its extendible
note program,
Broadhollow,
becomes the first
asset backed
program to extend
4
• Sentinel Management
Group Inc., a private group
that manages money for
commodity brokers halted
redemptions on some of its
funds – initially rumored on
CNN as a MMF.
Three other programs extend:
• Luminent Star, managed by
Luminent
• Ottimo, managed by Aladdin
• Lakeside, managed by Deutsche
Bank
August 6th
February 2007
Source: Federated Investors
August 17th –
*Fed board cuts
discount rate to
5.75% from
6.25%
August 10th
• BNP stops redemptions on 3
funds including a SICAV
because of inability to value
sub-prime bonds
• Rumors in Europe about
another German bank failure.
• ECP investors sit on sidelines
and don’t invest expecting
redemptions
• The ECB makes money
available at low rates but banks
take cash and hold it
August 15th – 17th
August 14th
August 15th
• Three extendible note
market value mortgage
securities programs are
put on watch for
downgrade (KKR
Atlantic, KKR Pacific,
Ottimo Funding)
• Rams (Aussie
mortgage originator)
extends notes on two
of its programs, Rams
Funding Two and
Rams Funding Three
Aug. – Sept. 2007 ABCP Liquidity Facilities Drawn, SIV’s Downgraded
August 24th – Fed advises
market that bank affiliates’
ABCP may be financed
through the discount window
• HBOS draws on ABCP
liquidity facilities to repay
maturing ABCP of Grampian
Funding ($37 bn) and
announces it will not return to
the ABCP market until pricing
improves
August 21st
August 21st
• Certain non-bank sponsored Canadian ABCP
programs have difficulty rolling ABCP and
attempt to draw on their liquidity facilities
• Banks refuse to fund liquidity facilities,
claiming the condition to funding found in
Canadian liquidity facilities--a “general market
disruption”—did not occur
• A syndicate of banks agreed to “the Montreal
Proposal” to convert $40 bn of Canadian
ABCP into longer term floating rate debt and
repay ABCP investors
5
Source: Federated Investors
Week of
August 27th
August 28th
September 5th
August 24th
• ANZ decides to finance
A$2.5 bn of conduit assets
on balance sheet and
expects to move an
additional A$2.1 bn over
the next six weeks
• The SIV Cheyne Finance hits an
enforcement trigger and enters into
liquidation
• S&P downgrades Cheyne ABCP
to A-2 from A-1+, MTNs to A- from
AAA and Mezzanine Notes to Bfrom A.
• On August 29th, Moody’s places
Cheyne’s subordinate notes on
review for downgrade
• Moody’s takes rating
actions on several SIVs
and revises its SIV
methodology
• Moody’s cites the
deterioration of market
value of certain portfolios
and potential impact of
crystallized losses
following asset sales as
the reason for the
downgrades
Sept. – Oct. 2007 Central Bank Intervention SIV Downgrades
• Fitch downgrades
SIV Axon Financial
Funding’s senior notes
to F1/A from F1+/AAA
ECB injects $57.7 bn
into the market; the Fed
followed with three
injections to the
banking system totaling
$31.25 bn in repos
September 18th - Fed eases
Fed Funds rate by 50 bps to
4.75% and lowers discount
rate by 50 bps
• Several US Banks announce they
are working on a proposal with the
US Treasury called “M-LEC”
(Master Liquidity Enhancement
Conduit) to provide liquidity relief to
SIVs via asset purchases
• Details of plan still unclear, as
market participants wait for more
information to determine
effectiveness of proposal
• Ottimo begins to liquidate portfolio
after failing to reach a resolution
with creditors
• Rhinebridge’s manager declares
an insolvency of Rhinebridge,
which halts payments
October 19th
October 17th
September 6th
September 18th
September 12th ECB injects £75
bn into market
6
Source: Federated Investors
October 10th
October 15th
October 18th
• SIV Cheyne Finance’s
receiver declares an
insolvency of Cheyne, which
halts payments and triggers
an acceleration of all senior
liabilities
• Moody’s downgrades Ottimo
Funding’s ABCP to Not Prime
• Cheyne Finance’s
senior notes are
downgraded to
“Default” by S&P
• Rhinebridge’s senior
notes are downgraded
to “Default” by S&P
and Fitch
Oct. – Nov. 2007 Financial Company Writedown Announcements – SIV
Restructuring
31st
October
- Fed
eases Fed Funds
rate by 25 bps to
4.50% and lowers
discount rate by 25
bps
• Merrill Lynch
reports Q3 loss
of $2.3 bn
October 23rd
October 25th October 29th
7
November 6th and 7th
October 31st
October 24th
• SIV Axon
Financial
Funding enters
into
Enforcement
• Florida’s State
Board of
Administration funds
come under public
scrutiny following
news that $2.2 bn in
assets managed by
the Board were
downgraded below
investment grade
• UBS reports Q3
loss of CHF 726
million (pre-tax)
• WestLB announces
a restructuring of its
Kestrel SIV and
WestLB agrees to
repay senior notes
as they come due
• HBOS returns to funding its
Grampian program in the
ABCP market after exiting the
ABCP market this summer
due to high funding costs
November 26th
November 14th
• Moody’s
takes rating
actions on 16
SIVs
• MBIA winds down its
SIV Hudson-Thames
• Moody’s takes rating
actions on $130 bn of SIV
debt, citing material
declines in market value
and the continued
inability of SIVs to issue
or roll ABCP or MTNs
November 29th
November 27th
• HSBC announces it
will restructure its
$45 bn SIVs (Cullinan
and Asscher) and
take them on balance
sheet
• State of Florida
suspends
withdrawals from
some of its funds
Source: Federated Investors
November 30th
Nov. – Dec. 2007 Continued Central Bank Liquidity Provisions, SIV
Restructuring, MMF Loss Announcements
• US ABCP spreads for
maturities into 2008
widened to levels of
LIBOR plus 40 to 200
bps for some issuers
November 30
• Societe Generale
agrees to provide
100% liquidity
support to repay
ABCP & MTNs for
its $4.3 bn SIV
PACE
• The Fed, ECB, and several other
Central Banks announce a joint
effort to add liquidity to the financial
markets
• Fed says it will hold several Term
Auction Facilities (“TAF”) to
purchase various types of collateral;
two such auctions would be held in
December at $20 bn each
• HSH-Nordbank announces
that it will restructure its SIV,
Carrera, to have full liquidity
from HSH-Nordbank
• WestLB announces a
restructuring of its Harrier SIV
and WestLB agrees to repay
senior notes as they come
due
8
December 19th
December 12th
December 10th
December 18th ECB injects
$500 bn of
liquidity to ease
market tensions
December 12th
December 12th Fed eases Fed
Funds rate by 25
bps to 4.25% and
lowers discount
rate by 25 bps
Source: Federated Investors
December 20th
December 18th
• Fed conducts $20 bn TAF
auction with 93 bidders and
$61.5 bn in submitted bids.
• S&P places AMBAC’s longterm corporate rating (AA) on
negative watch
• Investment
Advisor injects
$1.4 bn into its
money funds to
protect against
losses
Dec. 2007 – January 2008 Monoline Insurance Concerns, Inter- Meeting
Fed Ease, Muni Money Market Questions Begin
• Both Moody’s and S&P
downgrade MBIA’s longterm corporate rating (not
its ‘Aaa/AAA’ insurance
financial strength rating)
on capital concerns
December 21st
9
• Moody’s places MBIA’s
insurance financial
strength rating on
negative watch (Aaa)
• Spreads for full-liquidity ABCP
programs appear to be
stabilizing
• SIV Victoria Funding enters
into Enforcement
Source: Federated Investors
January 22nd - Fed
eases the Fed
Funds rate by 75
bps to 3.50%,
marking the first
pre-meeting move
since 9/11 and the
largest reduction
since 1984
January 18th
January 8th
January 9th
• M-LEC plan is abandoned
after many banks
announced restructuring
plans for their SIVs
• Fitch places AMBAC’s
long-term corporate rating
(AA) on negative watch
• Moody’s places Ambac’s insurance
financial strength rating on negative watch
(Aaa)
• Fitch removes MBIA’s insurance financial
strength rating from negative watch
January
16th
January
17th
January 24th
January 22nd
• Market concern
mounts over MBIA
and Ambac
potentially losing
their ‘AAA/Aaa’
insurance ratings
• S&P places
Ambac’s financial
strength rating on
negative watch
(AAA)
• Fitch downgrades
Ambac’s financial
strength rating to
AA
• NY Regulators
arrange meetings with
banks to discuss
rescuing bond
insurers
• UBS reports a
quarterly net loss
of 12.5 billion
Swiss francs
January 30th
January 31st
January 30th - Fed
eases the Fed Funds
rate by 50 bps to
3.00% at its scheduled
meeting, just a week
after cutting the Fed
Funds rate by 75 bps in
a pre-meeting move on
January 22nd
Feb. 2008 – March 2008 Muni Money Market Questions
Continue, Counterparty Risk Becomes a Crisis
UBS
liquidates
$24 billion
in MBS,
Carlyle
Group hit
with margin
calls
Municipal
money
market
funds
exercise
puts due
to
concerns
over
bond
insurer
ratings
Mar 12
Mar 4-6
February
Fannie
Mae posts
a $3.55
billion 4Q
loss;
Freddie
Mac posts
a $2.5
billion
loss.
10
Source: Federated Investors
On a
Sunday, Fed
announces
deal
between
Bear and JP
Chase; also
creation of
Primary
Dealer
Credit
Facility
Fed
announces
Term
Securities
Lending
Facililty;
first auction
on Mar 27th
Feb 27 & 28
OFHEO, Fannie Mae,
and Freddie Mac
announce major
initiative to increase
liquidity to agency
MBS market (up to
$200 billion).
Mar 18
Mar 14
Mar 11
Flight to
quality to
Treasury
market; yields
on Treasury
bills and
Treasury repo
driven below
1%
Mar 16
Rumors of
Bear
Stearns
liquidity
crisis grip
market
Bear
Stearns
forced to
borrow
from Fed
through
JP Chase
Mar 19 – Mar 27
Mar
–
Fed eases
monetary
policy by 75
bps,
bringing the
Fed Funds
target to
2.25%. The
move was
less than
what was
expected by
the market.
18th
FHFB
Announces
new MBS
limit for
FHLBs
5.25% FF Target
4.75% FF Target
50 bp ease Sep 18
Summary of Major Federal Reserve Actions
August 2007 – March 2008
4.5% FF Target
25 bp ease Oct 31
4.25% FF Target
25 bp ease Dec 11
3.5% FF Target
75 bp intermeeting ease
Jan 22
3% FF Target
50 bp ease Jan 30
2.25% FF Target
75 bp ease Mar 18
Mar 7
Expanded
TAF
Mid-August
Dec 12
Fed
encourages
discount
window
borrowing
11
Term Auction
Facility (TAF)
Source: Federated Investors
Mar 11
Term
Securities
Lending
Facility
Mar 16
Primary
Dealer
Lending
Facility
An Uncertain Economic Backdrop
Sub-prime mortgage delinquencies and defaults in the US have led to significant turmoil in credit and equity
markets, and are now affecting the broader US economy.
 Losses and foreclosures on specific mortgages have caused the housing market to spiral downward, deflating
housing prices
 Opacity in mortgage instruments caused a crisis in investor confidence
Global economic prospects for 2008 rest partially on the US outlook.
 The US economy is likely to either
– Return to moderate growth in the second half of 2008, or
– Remain in slowdown/recession
 Citi economists currently anticipate modest growth in US GDP for 2008, with inflation remaining elevated
 The US housing contraction is expected to continue through 2008 and possibly 2009
 Exports are expected to hold up, due to strong demand from the rest of the world and a weaker US Dollar
Citi Economists currently forecast global growth of 2.9% in 2008, led by the Emerging
Markets.
GDP Growth
Inflation
Current Acct/GDP
World
US
Euro Area
Emerging Markets
12
2007F
3.9
2.2
2.6
7.2
2008F
2.9
1.3
1.4
6.1
2009F
2.8
1.6
1.2
5.9
Source: Citi EMA, “Global Economic Outlook & Strategy,” April 24, 2008.
2007F
3.1
2.9
2.1
5.3
2008F
4.3
4.0
3.0
7.0
2009F 2007F 2008F 2009F
3.0
0.3
0.0 (0.2)
2.1 (5.3) (5.3) (4.7)
1.8
0.2
0.0 (0.1)
5.6
4.5
3.4
2.2
Amid Uncertainty and Falling Rates, Liquidity Has Grown
 After raising the Fed Funds rate 400 basis
points (bps) from June 2004 to June 2006,
the Fed has brought the rate down from
5.25% to 2.00% as of May 2008
Fed Funds Rates 2004–2008 (1)
6.00
Fed Funds Rate
Rates Expected to Continue to
Decline
5.00
4.00
3.00
2.00
1.00
US Corporate Liquidity (1)
 US corporations hold roughly $5.25 trillion in
liquidity (cash, deposits and short-term
investments), up considerably from 2000 but
down slightly from 2006
20
08
20
07
($ in Trillions)
Down 2.9% from
2006
$6.0
$5.0
$4.0
 Regulatory change (i.e., Sarbanes-Oxley)
and shifts in the investment provider
landscape have also influenced liquidity
management practices
$2.0
(1) 2007 US Corporate Liquidity Research, Treasury Strategies, March 2008
20
06
Total Corporate Liquidity 2004–2007 (1)
 The rise in short-term liquidity has correlated
with the rising rate environment since 2004
13
20
05
0.00
20
04
 Rates are expected to stay flat throughout
the remainder of 2008
$4.70
$5.40
$5.25
2006
2007
$5.00
$3.0
$1.0
$0.0
2004
2005
Corporate Investment Practices
14
Types of Cash
.
 Four distinct types of corporate cash. Each type has unique
characteristics and objectives.
– Operating Cash is the daily transactional buffer of a corporation, for the
“payroll to payroll” cycle. Must be 100% convertible into cash at zero risk
and immediate liquidity.
– Reserve Cash is the cushion to sustain a corporation through the seasonal
/ business cycle. There is little need to convert this entire amount to cash on
a daily basis.
– Accumulation Cash is cash in excess of operating and reserve balances,
set aside for strategic purposes or a major financial event.
– Required Cash represents funds that must be set aside for specific
activities, usually with restrictions. This includes escrows, performance
deposits, sinking funds, etc.
15
Key Investment Factors
When determining the proper cash investment product an investor must first consider these four main
factors and their corporate investment policies.
 Investors must assess their expectations before making an investment decision. Safety
is a relative term and does not provide enough explanation as to an investors needs and
expectations.
– Risk: What is the level of “risk” an investor is willing to accept? Investment guidelines may help eliminate several
investment options based on the risk involved or the rating of the instrument.
– Preservation of Capital: Is preservation of capital essential or required?
– Liquidity: Is daily liquidity necessary? Is liquidity a prerequisite for all of the cash being invested? Giving up some
liquidity may provide additional returns/yield.
– Expected Return: Given the expectations for risk, preservation of capital and liquidity, what are the available
investment products that fit the criteria the investor is looking for? What are the returns/yields on the available
products and do they provide a return that the investor is expecting? Different products may provide a wide
spectrum of returns given the current market turmoil.
Overall Market ( Billions)
Repurchase Agreements
Commercial Paper
Money Market Mutual Funds
Enhanced Cash Funds
Notes & Bonds
Auction Rate Securities
Bank Deposits and Sweep Accounts
Term Deposits
TOTAL
*Source: Treasury Strategies Inc.
16
July 1, 2007
138
832
1,622
206
498
170
782
1,252
5,500
Jan 1, 2008
80
209
2,136
155
434
98
1,061
1,079
5,251
Change
-42%
-75%
32%
-25%
-13%
-43%
36%
-14%
-5%
Net Flow
(58)
(623)
514
(51)
(63)
(72)
279
(174)
(249)
Corporate Liquidity Portfolios – Money Fund Usage
Institutional Money Funds assets rose dramatically in H2 2007 and are expected to continue rising in 2008,
with corporate investment behavior as one key driver.
U.S. Domestic Money Funds
Historical & 2008 YTD
Key Reasons
Money Fund Assets ($B) & Returns (% )
4,000
7.0
6.18
3,506
3,500
4.77
3,000
3,126
5.01
6.0
5.0
4.93
3.98
2,500
2,285
2,000
4.0
2,272
2,385
2.93
2,052 1,913
2,057
2.75
1,845
1,613
3.0
2.0
1.56
1,500
1.0
1.07
0.88
1,000
0.0
99
00
01
02
03
04
05
06
07
08ytd
Source: Crane Data, ICI.
MMF assets have increased by $892
17
billion, or 34.2%, in the past 8 months
 Falling market interest
rates – short term “lag
effect” & lower opportunity
costs of using MMFs vs.
direct investments
 Greater risk aversion –
shift away from direct
investments
 Downturn in economic
cycle – treasuries may seek
to remain more liquid in
uncertain times
Corporate Liquidity Portfolios- Investments Change with Interest Rates
With the Fed Funds rate dropping to 2.00% and further declines on hold, we should see a reduction in the
spread between funds and other investments. However, the spread between US Fed Funds and Libor
based Investments is still wide.
 Since 1999, there has been a general trend of money fund levels (as a proportion of the composite portfolio)
rising when interest rates drop and dropping when interest rates rise
 Money funds declined as a percent of total corporate cash from 27% in 2006 to 20% in 2007
 However, overall corporate cash increased, which helped lead money fund assets to another industry record in
5.25%
2007
4.75%
Fed Funds Rate January 1999–2008
4.25%
1999
Corporate Liquidity
by Instrument
2.25%
MM Mut
Funds
10%
1.00%
Notes/
Bonds
13%
Other
32%
2004
Corporate Liquidity
by Instrument
Other
28%
MM Mut
Funds
36%
CP/Repo/
CD
45%
18
2005
Corporate Liquidity
by Instrument
MM Mut
Funds
Other
21%
26%
CP/Repo/
CD
15%
Notes/
Bonds
21%
Other
2006
35%
Corporate Liquidity
by Instrument
MM Mut
Other
Funds
25%
27%
Notes/
Bonds
18%
CP/Repo/
CD
27%
CP/Repo/
CD
25%
CP/Repo/
CD
24%
MM Mut
Funds
20%
2.00%
2007
Corporate Liquidity
by Instrument
Notes/
Bonds
23%
Notes/
Bonds
29%
Source: 2007 US Corporate Liquidity Research, Treasury Strategies, December 2007.
Corporate Portfolios – Maturity, Composition, Objectives
Most corporates maintain portfolios with a short time horizon and in a limited set of
instruments.
The 2007 AFP Liquidity Survey, completed June 2007, indicated:
80%
70%
60%
50%
40%
30%
20%
10%
0%
All other (incl
direct
instruments),
46.50%
74%
14%
0-30 days
31-90 days
Source: AFP
Avg. Maturity
6%
6%
91-364 days
1 year or
more
Source: AFP
MM Funds,
32.40%
Bank
Deposits,
21.10%
Avg. Portfolio Composition
Treasury investment policies emphasize liquidity and capital preservation over
yield. Since last Summer, all the evidence is that companies have:
• Increased usage of high-quality bank deposits, government-issued instruments, and money funds and are
keeping portfolios very liquid.
• Decreased usage of direct investment instruments
19
Automation – A Pressing Need
In the drive for greater control and oversight over global portfolios, the need for
automation has become more pressing...
Tools Utilized for Liquidity Management Processes (% Respondents)
Phone
Fax
E-Mail
Online
Spreadsheet
Workstation
Automated*
Gather Balance Reports
2%
3%
7%
61%
15%
24%
85%
Determine Dollar Amount to Invest
2%
0%
6%
11%
64%
20%
31%
Cash Forecasting
1%
0%
4%
5%
76%
9%
14%
Determine Desired Maturities
3%
6%
4%
11%
48%
7%
18%
Compare Investment Instruments
19%
3%
6%
38%
15%
4%
42%
Compare Investment Yields
17%
4%
8%
40%
15%
4%
44%
Execute Trades
45%
9%
13%
40%
2%
42%
Confirm Trades
25%
14%
23%
43%
0%
2%
45%
1%
0%
3%
27%
38%
3%
30%
Benchmark Performance
Source: Treasury Strategies
* Online + Workstation
• 28% of respondents to TSI’s 2007 survey said they spend over two hours a day
managing their investment portfolio
• Respondents spent the most time on the daily cash positioning process (gathering
balance reports, determining dollar amount to invest, and cash forecasting).
• Timely policy compliance checking, portfolio reporting and benchmarking is getting much
more focus due to the events in the market
20
Companies realizing that many of time-intensive processes can be
automated, releasing greater efficiency and allowing better control
Automation – Portals
As corporations strive for greater control and oversight over global portfolios, the
need for automation has become more pressing...creating the opportunity for
investment portals
 Portal usage is increasing - Just under a third of investors in the U.S. use
investment portals. Usage in North America and Europe continues to increase
 Helping the inflow to MMFs - Portal users tend to use money funds more
heavily. 67% of portal users invest in money funds
Organizations that use
Investment Portals
Portal Use - Money Market Fund Usage
Do Not
Use
71%
Over half of
port. In MFs
38%
Do not use MFs
33%
Use
29%
Under half of
port. In MFs
29%
21Source: Treasury Strategies
Visualization: A Window into Cash
 Global banks are racing to provide
enterprise-wide visibility across global cash
(accounts, debt and investments, cash pools)
Aggregation
 Corporates should integrate this visibility
with TWS, ERP systems
Integration
 Banking portals will increasingly incorporate
online transaction tools for intercompany
treasury-related processes (e.g. CF)
Analytics
Measure
Decision Forecast
Support
Information Reporting
• Data Aggregation &
Integration Service
• Portal Service
22
Act
 Corporations should demand their bank to
provide customizable analytics to further
support these decision tools
Automation-Analytics
Compliance
 Access to the portfolio's compliance status
 Automatically e-mails compliance violations to specified individuals
 Configurable compliance guidelines can be set to meet the needs of individual investment policies
Performance
 Compares the performance of daily portfolio and index total returns
 Illustrates the main factors affecting the performance of the portfolio through portfolio-level
performance attribution
 Assesses multi – manager performance by providing you with a view of each portfolio and its
index
Accounting
 Provides assurance that the accounting numbers are accurate, complete, and easily verifiable
 Daily, independent accounting information, including a balance sheet, income statement, statement
of cash flows, impairment, cash flow forecasting, and more
 Reporting on both aggregate and individual portfolios
23
Automation-Analytics
Providers
 Custodians
 ERP/TWS Systems
 Clearwater
 Decision Analytics
24
Money Market Funds –
Rule 2a-7 and “AAA” Ratings
25
Rule 2a-7
Money Market Funds are managed according to Rule 2a-7 of the U.S. Investment
Company Act of 1940
 Objective
– Parameters to ensure a stable $1 NAV
 Rule 2a-7
– Maximum WAM of 90 days, 397 day maximum per security
– Maximum of 5% invested in any one issuer, 25% per industry
– Maximum of 1% per A2/P2 name, 5% of total basket
– Credit documentation procedures - ongoing credit analysis
26
Rule 2a-7 – A Brief History
27
“AAA” Rated Funds
A rated fund provides added layers of protection and comprehensive on-going due
diligence mandated by the rating agencies
 Funds may be “AAA” rated by:
– Moody’s
– S&P
– Fitch IBCA
 Rating agencies impose further investment restrictions and monitoring beyond Rule 2a-7
– WAM: 60 days
– Non-rated funds can buy A2/P2 paper
– Non-rated funds are not monitored on a regular basis by a third party, rated funds are
continually reviewed on a weekly basis
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“AAA” Rated vs. Non-rated Money Market Funds
Rated *
Non-Rated
WAM
Max Fund WAM
Max maturity per security
60 days
90 days
397 days
397 days
Diversification
Max per Security
5%
5%
Max per Industry
25%
25%
Max Illiquid basket allocation
10%
10%
Rating Criteria
Minimum A1+/P1 allocation
50%
N/A
Maximum A2/P2 allocation
0%
5%
*Rated funds must also undergo weekly monitoring by each agency that rates the portfolio
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Summary
 Concerns about credit quality and liquidity have forced investors to move cash to “safe”,
high quality instruments
 Global corporations are increasingly centralizing their global cash and investing
processes and oversight
 Money market funds have weathered the credit & liquidity storm and remain an attractive
cash investment option
 Money market funds and high quality bank time deposits are the most common “active”
investments, with usage of the former growing especially rapidly
 Usage of automation / investment portals is increasingly common, with the fastest
growth now occurring internationally
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Q&A
31
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Mutual Fund Disclosures
 An investment in a money market portfolio is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although a money market portfolio seeks to preserve the value of an
investment at $1.00 per share, it is possible to lose money by investing in a
money market portfolio.
 Investors should consider a fund's objectives, risks, and charges and
expenses, and read the prospectus carefully before investing or sending
money. The prospectus contains this and other information about the Funds.
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