A rising rate environment can be challenging to even the most sophisticated fixed income investors. In this unpredictable environment, an actively managed ultra-short-duration strategy could be the optimal liquidity solution for treasurers.
With 2019 firmly underway, Jim Fuell, J.P. Morgan Asset Management, tackles some of the most important strategic challenges facing corporate treasurers over the coming months, including regulatory reform, the outlook for cash investors and rising interest rates.
Just as European corporate treasurers were starting to prepare for the entry into force of the EU Money Market Fund (MMF) regulation, a new obstacle has emerged that might put into question some of the fundamental aspects of the regulation.
The extremely low interest rate environment and uncertainty around future interest rate cuts are posing a growing challenge for treasurers sitting on relatively large cash piles. However, if treasurers are prepared to consider an ultra-short-duration strategy, investors can potentially garner returns above those offered by MMFs, while remaining in a low-risk solution.
Up until recently, Money Market Fund reform was a prospect that many treasurers were reluctant to embrace. However, in this new regulatory era it is in the investor's interest to take advantage of the products that are emerging from reregulation, such as the fixed-term fund.