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The Future of Corporate Investing

Underwritten by Allspring

The Future of Corporate Investing

The AFP Executive Guide: The Future of Corporate Investing, underwritten by Allspring, explains how dividing cash into different segments is a crucial tool for treasurers handling cash in any situation.

The Executive Guide details how treasurers can establish distinct investment guidelines and parameters for each cash segment, facilitating investments that match their organizations' risk tolerance. It concludes with an examination of the upcoming money market fund reforms and their potential impact on corporate treasurers.

Download the guide to learn:


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IMPORTANCE OF CASH SEGMENTATION FOR ANY RATE ENVIRONMENT

At the heart of cash segmentation is the classification of cash according to the likely future needs of the business. Broadly speaking, companies can categorize cash into three segments (names may vary):

  1. Operating Cash
  2. Medium-term Cash/Working Capital
  3. Long-term/Strategic Cash

CASH SEGMENTATION CHANGES IN LIGHT OF SHIFTING RATES

As interest rates peak and a downward trend is anticipated, corporate treasurers seek to seize yield-enhancing opportunities without altering the segmentation process or investment policy. To ensure this take advantage of these opportunities:

  • Maturity Changes
  • Duration Changes
  • Credit Quality Changes
  • Concentration Risk Changes
  • Allocation Changes by Asset Type

FUTURE-PROOFING YOUR CASH SEGMENTATION

The SEC’s latest round of money fund (2a-7) reforms was published in July 2023. While the precise impact of the reforms is unknown, treasury practitioners should try to understand the potential implications for their organizations.

Proposed reforms include four key measures:

  1. The removal of redemption gates.
  2. An increase in portfolio liquidity requirements.
  3. A liquidity fee requirement.
  4. Additional provisions to address the effect of potential negative interest rates.
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Published May 21, 2024