Cash & Liquidity Management
Published  4 MIN READ
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Leader: Three Degrees of Liquidity

by Jason Singer, Managing Director, Head of International Cash Portfolio Management, Goldman Sachs Asset Management

Liquidity management has always been an important consideration for treasurers, but the recent credit crisis has forced them to review their investment policies and ensure their company’s cash is managed within the boundaries of an effective and well-balanced risk management framework.

The recent focus has been on remaining highly liquid with the result that companies are holding more cash than previously. Treasurers must decide how to manage cash effectively whilst ensuring it is safe, available when required and makes a competitive return for the company while minimising market and credit risks.

As economic confidence returns, capital security and access to cash still remain critical – however, treasurers may be beginning to either give up liquidity, or extend duration in the search for higher yields. Before considering the re-introduction of riskier assets, we recommend that treasurers partition their cash reserves into portfolios with distinct functions, time horizons and investment objectives. We believe that this process can help treasurers find a more stable balance between return, risk and liquidity.