Treasury Strategies, a treasury consulting firm, has unveiled a methodology for managing money market fund (MMF) investment risk in the white paper, ‘The Next Generation of Money Market Fund Investing, Defining A New Approach‘. In the paper, Treasury Strategies identifies a transformational process that guides corporate treasurers in aligning their MMF investments with the organisation’s risk profile. Treasury Strategies’ customised process is built to close the risk gap for corporates when making MMF investments.
“This new approach establishes clear ranges that corporations can use to define their risk management investment policies,” said Mike Gallanis, partner of Treasury Strategies and head of the firm’s corporate consulting practice.
Treasury Strategies recommends that corporate treasurers take into consideration the seven following investment guidelines:
- Ten to 35%: maximum investment in any single money market mutual fund (MMMF) as a percentage of total investment in MMMFs.
- Variable: maximum investment in any single MMMF as a notional amount.
- Five percent: maximum investment in a fund’s total assets under management (excluding separately managed accounts).
- Fifty to 100%: maximum investment in any single fund family as a percentage of total investment in MMMFs.
- Three to 5%: maximum investment in any single fund holding issuer as a percentage of total investment in MMMFs (excluding government, government agencies and repo counterparties).
- Sixty to 100%: minimum investment in rated MMMFs.
- Zero to 50%: maximum investment in any single country as a percentage of total investment in MMMFs (based on the domicile of fund holding issuers) (outside corporate domicile).
ICD, an institutional MMF portal, has integrated Treasury Strategies’ new investment guideline approach for use by corporate investors as a new feature in its on-demand, compliance management and reporting application, Transparency Plus 2.1.
Bill Razzino, CareerBuilder’s vice president global corporate finance, said: “CareerBuilder is continually looking for ways to better leverage technology and improve our internal processes. ICD’s Transparency Plus and Treasury Strategies’ MMF investment guidelines have helped us automate our compliance process for managing our short-term MMF investments. Treasury Strategies’ MMF investment guidelines and ICD’s automated guideline and analytic tools work together seamlessly to enable us to instantly monitor our MMF investments against our policy settings.”
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