Cash: The Forgotten Asset Class

In the face of rising costs, increased competition and uncertain economic and political environments, corporates have amassed a record amount of cash. Bobby Jackson, Managing Director and Co-Founder of money broker and deposit specialist FXD Capital, reveals its new partnership with TreasuryXpress, a leading provider of digital and on-demand treasury management solutions, to better identify opportunities for corporates to reduce idle cash.

Why so idle?

The key challenges for treasuries are clear and, at times, overwhelming. They include creating a robust yet practical treasury mandate, initial and ongoing risk analysis of existing banks, identifying and assessing new banks, ensuring pricing is fair and representative of the market and bank risk, overcoming the challenges presented in engaging new banks, and the subsequent opening of bank deposits.

Perfecting the four pillars of portfolio management is a daunting task and often bypassed due to the inertia around changing banks or the perception that the effort does not warrant the benefit.

The four pillars of portfolio management are:

• Liquidity
• Risk
• Capital efficiency
• Yield

Investing idle cash should not be overlooked, least of all any yield achieved helps lower the real cost of holding cash in inflationary terms.

Recognising potential

There are circa 345 banks in the UK able to take deposits, yet most treasuries until now would consider only a small handful, often dismissing most of the banks available on the assumption that they do not meet the necessary criteria. As UK banks in their own right, many are subsidiaries or branches of overseas banks and may appear inaccessible or don’t make their appetite or rates for raising new liabilities known. Because of this, rates are suppressed from those names more commonly considered and, in most cases, the rate paid is not representative of the liquidity benefit the bank receives.

The Fed has hiked seven times since 2017 until now, while the Bank of England has hiked twice during the same period. We know that in many cases this hasn’t translated into a representative increase in rates for the depositor.

What can you do about it?

Chris Huddleston, my co-founder and I have worked together since 2011. Having co-founded FXD Capital in 2018, we are sharing our wealth of experience in money markets and treasury risk management. Independent of the banks, we have relationships with charities, corporates and institutions, broking deposits to help treasurers improve capital efficiencies by:

• Enhancing liquidity
• Reducing counterparty risk
• Maximising yield

By broking deposits with our partner banks, we achieve better returns and improve capital efficiencies, offering clients access to a wider range of Term Deposits and Notice Accounts. It’s also the banks that remunerate us, therefore there is no cost to our clients for our service.

Treasuries are often working blind, without effective software to marry up the balance sheet and communicate liquidity positions and risk exposures. These systems are notoriously difficult to get right, which is why we are delighted to announce our partnership with TreasuryXpress. As a fintech doing things differently and distancing itself from the incumbents it’s looking to disrupt, TreasuryXpress’ technology is helping treasuries improve daily and strategic operations with streamlined cash visibility and reporting. This gives clients a comprehensive view of their liquidity and cash.

With the barriers many treasuries traditionally faced removed, TreasuryXpress clients can now leverage the expertise of FXD Capital to provide a proactive deposit rate aggregation solution. This takes advantage of a broader range of banks and enables clients to make informed decisions on their cash deposits.

For more information on FXD Capital and the TreasuryXpress partnership, please visit www.fxdcapital.com/news or get in touch with Bobby Jackson at [email protected].