Capital Advisors on Deposits, SMAs
Boutique cash manager Capital Advisors Group released a white paper entitled, "The Transformation of Corporate Deposits in a New Regulatory Environment" and a press release entitled, "Capital Advisors Group to Introduce Liquidity Accounts for Corporate Cash Investments." The paper's abstract says, "Bank deposits have always represented the main cash management vehicle for institutions. Growth in deposits and money market fund balances crisscrossed each other over recent decades. Recent financial regulations, notably the liquidity coverage ratio, net stable funding ratio and G-SIB capital surcharges, caused deposit dynamics to change, reducing banks' appetite for non-operating deposits. We offer seven practical tips to help treasury managers cope with the new deposit reality." The "Seven Tips to Cope" are: "1. Deepen existing relationships, 2. Diversify, 3. Size still matters, 4. Integrated counterparty risk assessment, 5. Liquidity is the name of the game, 6. Alternative liquidity vehicles, and, 7. Beware of higher interest rates." The piece adds, "Challenges in corporate transaction deposits and prime money market funds open up opportunities to alternative liquidity vehicles. Such options may include separately managed accounts (SMAs) and direct purchases of government and corporate debt as well as repurchase agreements, private liquidity funds, ultra short-term bond mutual funds and exchange traded funds (ETFs). Although few alternative vehicles can truly replace the functions of transaction accounts, especially as sweep vehicles, they may fulfill certain functions not readily available in deposits alone." The press release, subtitled, "Portfolios of directly owned short-term securities are new alternative to institutional money market funds," says, "Capital Advisors Group today announced it will offer a new short-term cash investment vehicle -- Capital Advisors Group Liquidity Accounts -- for investors considering alternatives to institutional prime money market funds. Designed to provide safety of principal, short-term liquidity, and control through portfolios of directly owned securities, Capital Advisors Group Liquidity Accounts are a response to SEC regulations that will change the risk and liquidity profiles of institutional prime money funds starting in October 2016."
