BlackRock released a white paper entitled, "Insights to Act On: Adapting Cash Investment Policies for Money Fund Reform." The summary says, "Fund providers, investment platforms, and industry groups are rapidly preparing for the implementation of structural U.S. money market fund reforms in October 2016 focusing on fund changes, operational issues and the like. Investors should be preparing as well. This starts, we believe, with the review or creation of a strong investment policy. We believe that a cash policy should be all encompassing and should outline acceptable investments from money market funds to short duration investments and individual bonds. As October 2016 approaches, we expect that most investment policies will need to be altered to comply with the new money market fund rules, particularly with respect to language requirements around preservation of capital, liquidity and yield. A flexible approach to this exercise can provide the diversification, stability and income needed in today's landscape and prepare the investor for the environment of tomorrow. In this paper, we provide actionable ideas to evolve your policy to help meet the demands of the cash markets—today and tomorrow." BlackRock's piece urges investors to: "Define investment objectives and portfolio goals, with clear liquidity needs and risk tolerances; Explore total return as a measurement of cash performance; and, Understand the hidden cost of liquidity associated with restrictive investment policy language." It continues, "For the institutional cash investor, the investment policy is the driver behind the acceptable strategies and investment options agreed upon by the company. It serves as a roadmap that in-house investors and external managers follow in making cash investment decisions. This changing investment environment is a great opportunity to assess the investment policy and evaluate its efficacy. A strong investment policy starts with clear investment objectives and portfolio goals. Liquidity needs, risk tolerances and performance requirements will shape the way investment policies are designed, and, in our opinion, should be the first areas considered in the development of meaningful investment policies. We recommend an active segmentation strategy for cash based upon your cash forecasts and the time horizon for their use. Here are a few steps to take when looking at your cash investment policy and forming investment objectives and goals." BlackRock says to, "Conduct a thorough evaluation of your cash needs.... Develop an investment policy (or policies) for each component of your cash.... Align the risk profile of each cash segment with the investment objectives, including performance or the need for capital preservation [and] Clearly define the appropriate investment solutions permissible for each cash bucket.... The investment universe for cash investors is expanding in the wake of reform and it will be important to consider new alternatives that may be suitable for varying cash needs. For example, many investors may use money market funds (MMFs) with constant net asset values for operating cash post reform and may consider floating net asset value (FNAV) MMFs for core cash in the new world." Finally, the piece adds, "In the current environment and in the future environment, we believe cash investors must sharpen their focus on their specific objectives and make sure their cash allocations are flexible, able to mitigate risk, and adaptable as market circumstances change. Evaluating your investment policy against the changing money market fund landscape is a critical first step."

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