Table of Contents
Table of Content
Active Management of Cash Holdings
Many organizations—universities, health care institutions, non-profits—are not optimizing their cash balances and are failing to benefit from additional income that may be earned with a cash segmentation strategy. As organizations grow and needs become more complex, cash and liquidity management are often overlooked.
Partnering with an experienced active asset manager can help organizations navigate market alternatives and optimize cash holdings.
Using current yield levels for various cash instruments, we have demonstrated how a basic cash segmentation strategy could result in additional interest income in the following example:
Hypothetical as of July 2024
Source: Fort Washington. The above hypothetical is being presented for illustrative purposes only and represents an example of cash management strategies and allocations. Actual allocations, yield, and income will be different from those shown, depending on current market and economic conditions, and client-specific needs. Yield shown do not reflect a single source but was approximated using a variety of average yield calculations and representative portfolio holdings as of July 2024. Income shown does not take into consideration any account fees and expenses that may be incurred with the management of a similar strategy. Past performance is not indicative of future results.
A Stair-Step Approach to Cash Segmentation
Cash segmentation involves dividing cash holdings into different segments based on their intended use and time horizon. In this example, we show three typical segments of cash, each with their own unique objective: Operating Cash, Tactical Cash, & Strategic Cash.
A tailored liquidity management solution that incorporates active investment management can optimize each segment by stepping up and down the return-risk spectrum of short-term market instruments.
Source: Fort Washington. There is no guarantee that investing will yield similar results; investing involves risks, including the potential loss of principal. Past performance is not indicative of future results. ABCP: Asset-Backed Commercial Paper; ABS: Asset-Backed Security; CP: Commercial Paper; FRN: Floating-Rate Note; MBS: Mortgage-Backed Security; Repo: Repurchase Agreement; VRDN: Variable Rate Demand Note.
Partnering With Clients
Each investor's needs and objectives are unique. A prudent investor understands all investment objectives, keeps current with the market environment, and stays abreast of dynamic and changing investment options. By having a thorough understanding of a client’s liquidity needs and properly segmenting cash, significant value may be added through a tailored cash management solution.
A core tenet of Fort Washington's approach to cash management is effective and regular communication with clients. This allows us to gain a thorough understanding of clients' cash needs and how these needs may change on a real-time basis. We work to go beyond what is typically expected of investment managers to help organizations realize the benefits of a tailored cash segmentation solution.
