Introducion & Overview

by Robin Page, Chief Executive, Treasury Management International

Our Guide to Cash Management for 2008 deals with some of the most pressing topics that treasurers are currently having to deal with, and reveals a great deal of just how they and their peers are coping with the many and varied pressures which are currently bearing upon them and their – often reduced – staff.

Writing on the subject of money market funds and how they are viewed after the dire events of last August, and the ensuing credit crunch, Alexander de Giorgio and David Rothon of Northern Trust point out that these funds were previously regarded as being “at the safer end of the risk/reward spectrum. But the financial crisis made treasurers question the degree of principal protection inherent in the funds – and not all of them are the same.

The authors give a summary of how the market developed over the last ten years, and explain how the recent dislocation has resulted in a significant divergence between various strategies available. Money market funds are not risk free, they emphasise, and it is vital that investment decisions should be active and fully informed. Treasurers must make the distinction between enhanced and short bond funds as they have a different risk profile from the safer ‘treasury style’ AAA funds. And most importantly, the risk appetite of investors and the objectives of the funds’ strategy should be in line with one another.

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