Morgan Stanley Investment Management posted a brief entitled, "Liquidity Darwinism." It tells us, "Darwin's Theory of Evolution is often applied to today's ever-changing business world: adapt and evolve. We believe this is particularly true for the modern treasury professional. In a liquidity investing landscape characterised by persistently low and negative rates, changing market forces, new regulations and product reform, the ability to adapt and evolve investment strategies has become ever more important. Companies that have been willing and able to change their investment policy in the face of today's shifting environment can benefit from improved yield potential, diversification and a greater set of investment opportunities." It continues, "Cash segmentation is a widely used strategy that many treasury teams have already successfully adopted over the past decade to help enhance their yields and gain better control and cost over their liquidity. The ability to reasonably forecast cash flows is critical for success, allowing the segmentation of liquidity into distinct pools, each with its own purpose and investment opportunity set. Investors have recognized that the cost of holding excess liquidity is extremely high and through liquidity optimization, they have reduced their opportunity costs. In order to make a segmentation process most effective, it is essential to ensure any investment policy is flexible enough to better align each pool's liquidity and return objectives.... Many multinational corporations have deliberately implemented strategies that better align their cash investments with their expected cash flow needs, recognising that making their investment policies more flexible would allow them to capitalize on different market opportunities. The greater the flexibility of the investment policy, the easier it is for investors to take advantage of market dislocations and to pivot to strategies which may still emphasize principal protection or liquidity, but could offer better risk and/or return potential. In many cases, these companies have also added alternative investment strategies, such as money market funds, repurchase agreements, direct investments and separately managed accounts to seek to enhance their returns." They add, "We believe that adapting and evolving is critical as new technologies and market dynamics change the treasury investing landscape. Today's treasurer usually benefits from improved visibility around cashflows, efficiency and control. We believe an investment policy that is flexible and adaptable will be better positioned for today's investment environment, as well as tomorrows. William Pollard, a 20th century physicist, may have summarized this best: 'Those who initiate change will have a better opportunity to manage the change that is inevitable.'"

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