The Association for Financial Professionals (AFP) published an article, "MMFs or SMAs? Why a Hybrid Approach Can Work." The piece, written by Tyler Haws from Clearwater Analytics, says, "With the persistent downward pressure on interest rates, many treasury and finance professionals find it difficult to balance preservation of capital and liquidity with the desire for higher yields. Depending on your organization's liquidity needs and appetite for risk, you may have considered a direct investment or separately managed account (SMA) strategy if: you want higher returns than those produced by money market funds (MMFs); you want greater transparency and control over your portfolio; or you are preparing for regulatory changes in the MMF industry. But while many recognize the potential benefits of SMAs, they are reluctant to enact the operational changes they would need to make SMAs a part of their investment approach. There's an outdated general industry perception that an SMA strategy would create an unnecessary administrative burden, introduce downstream accounting challenges, and require a more hands-on approach to investing than many are ready to accommodate. But are these concerns valid?" It continues, "To get a pulse on how companies in North America are investing, Clearwater Analytics surveyed thousands of treasury and finance professionals last year. The 2014 Corporate Investment Benchmark Survey revealed that 79 percent of respondents invest in both MMFs and SMAs, while 21 percent deploy an MMF-only strategy. For those investing solely in MMFs, 24 percent are considering SMAs, while 75 percent are sticking with an MMF-only approach. According to respondents, the core reasons to maintain their MMF-only approach were: immediate liquidity, preservation of capital, and a simplified accounting structure. The survey also polled investors' concerns with MMF reform. Overwhelmingly, the top concern was the floating net asset value (NAV) requirement for prime funds, followed by the potential downstream accounting implications of the floating NAV. Liquidity and general uncertainty were the next two areas of concern. Because reforms will not take effect until 2016, many investors have adopted a wait-and-see approach to reform before implementing changes to their approach to MMF investing and accounting processes, at least until more guidance is issued. `We do, however, expect to see a rush of activity in the spring of 2016, when this topic becomes top-of-mind for treasury and accounting professionals. MMFs and SMAs are both important -- if slightly different -- investment strategies. MMFs serve a vital liquidity function, while SMAs provide the opportunity to achieve returns that are higher than what is possible with an MMF-only approach. A hybrid approach allows organizations to maintain liquidity, preserve capital, and still find returns for a portion of their portfolios."

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