Short-term Investments: What’s Hot? What’s Not?

A Treasurer’s Guide to the Latest Investment Trends

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2022 has rocked the short-term investment world with soaring inflation, interest rate hikes, and pending MMF regulatory reforms. Treasurers have much to consider if they want to maximise the efficiency of their cash investments.

In this timely guide, written by TMI in partnership with Northern Trust Asset Management, we explore current trends in short-term investing. The goal is to help treasurers understand and maximise the efficiency of their cash investments. And since this aim comes with a broad (and increasingly broadening) scope of possibilities, our expert-led deep dive also uncovers some of the most suitable pathways ahead.

Through keen exploration of liquidity drivers, this guide also outlines the advantages of maintaining a diversified portfolio, and how understanding the liquid qualities of all underlying investments reveals how quickly cash can be freed up from short-term investments in an emergency. In addition, we consider the value of cash segmentation as an optimisation tool, especially as interest rate hikes and high inflation demand that treasurers better manage their short-term investment portfolios.

Eleanor Hill, Editor, TMI

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Outlook: Treasurers Face Myriad Changes

2022 has rocked the short- term investment world with soaring inflation, interest rate hikes, and pending MMF regulatory reforms. Treasurers have much to consider if they want to maximise the efficiency of their cash investments

The Importance of Liquidity

The liquidity shock of March 2020 underlined the importance for treasurers to understand exactly how quickly they can free up cash from short-term investments in an emergency. Misconceptions about how liquid specific investment instruments can prevent treasurers from accessing cash when they need it the most. Don’t get caught out; review and maintain a diversified portfolio where you understand the liquidity of all underlying investments.

Cash Segmentation, Diversification and Classification

Cash segmentation has been a popular short- term investment strategy for treasurers during the protracted time of low or negative interest rates across many economies. In a year of rate hikes and high inflation, this agile approach still puts treasurers in the driving seat to better manage their short- term investment portfolio.

Regulatory Change and Unintended Consequences

With new MMF regulatory proposals moving closer to becoming law in the US and Europe, industry stakeholders are urged to warn against potentially devastating unintended consequences of such reforms.

Short-term Markets Tackling the Long-term Issue of ESG

Sustainability is a matter that concerns everyone. Daniel LaRocco, Director, Money Markets, Northern Trust Asset Management (NTAM) and Greg Fayvilevich, Senior Director, Fitch Financial Institutions Group, explore how the short-term investment markets are rising to the challenge of meeting ESG criteria.

Time to Dump the Swivel-Chair: Embracing New Technology

The days of simply picking up the phone to seal a deal in the short-term investing market are now numbered due to the application of new technologies. Here, we explore how treasurers can begin leveraging the arrival of new approaches.

Ready to Trust: Are Crypto Assets Right for Treasury?

For those who believe crypto assets are too volatile and cannot be used by treasury, it’s worth knowing that they are not all the same. Lux Thiagarajah, Head of Markets, BCB Group, Wouter Sturkenboom, Chief Investment Strategist, EMEA and APAC, Northern Trust Asset Management (NTAM), and Dan Farrell, Senior Portfolio Manager, NTAM, explore the treasury potential of this diverse, and divisive, set of assets.

Key Takeaways: A Treasurer’s Checklist

Throughout this guide, we have presented some of the latest thinking around short-term investments and how best to manage them in a rapidly changing environment. This checklist distils those insights into critical action points and key learnings for every treasury team wanting to stay ahead of evolving short term- investment trends.