As investors seek shelter under the wing of money market funds during the current crisis, Tory Hazard, CEO of Institutional Cash Distributors, discusses the relationship between people and the systems that enable them to overcome the toughest obstacles.
Liquidity continues to top treasury’s leading concerns across industry surveys. But especially now, as the downstream effects of the Covid-19 pandemic continue to impact markets, companies are flocking to money market funds (MMFs) as a stable, safe investment.
In the month after the US Federal Reserve first cut interest rates 50 basis points, Institutional Cash Distributors (ICD) saw a 50% increase in MMF inflows (3 March – 3 April), outpacing the industry’s 27% increase tracked by the Investment Company Institute (ICI) during the same period (4 March – 1 April). Interestingly, 6% of ICD’s inflows came from new clients trading MMFs on ICD Portal [a software-asa-service system] for the first time.
This is noteworthy because it shows two things: first, the underlying integrity of these short-term investments – in spite of the shocks and stresses on the asset class – and second, that more corporate treasury executives, like the rest of the world, are leaning on technology to support their daily work and each other. In fact, it is technology that is bringing to the fore our most important asset of all – our human connection.
Investors, after all, are only human and they are coming into money markets during the pandemic because it is the best place to be. Unlike the global financial crisis, which was a credit event, this is a psychological event. Liquidity, or the lack of it, is driven by the confidence of buyers and sellers – by the human connection.
The monetary actions by central banks – from quantitative easing to the Money Market Mutual Fund Liquidity Facility in the US – were put in place to ensure market liquidity, not to prop up failing or fundamentally flawed products.
In 2003, a group of advisers founded ICD to help corporate investors protect the cash they need to pay the bills, meet payroll, pay dividends, and meet short-term debt obligations, using MMFs. ICD’s core tenet for servicing its clients was, and still is, trust – something garnered only through human relations and nurtured through consistent contact.
At the same time, ICD developed an investment portal so corporate investors can research, select, trade, settle and report on the market’s broad array of funds all from one place, easily, quickly and at no additional cost to the treasury department.
During the global financial crisis, ICD’s Global Trade Desk provided clients with critical information on the underlying assets in their portfolios, helping them understand what their exposures were so they could make informed investment decisions. Originally, we provided this service to clients on spreadsheets, but as necessity is the mother of invention, we automated this risk management activity, developing the industry’s first exposure analytics application, Transparency Plus.
Over the years, ICD has integrated almost all of treasury’s technology systems – not just to connect the data that flows between them, but to connect the team members throughout the organisation who rely on one another to achieve their collective goals.
This is ICD’s story, but the message within it is playing out all over the world at a time when humans are relying on technology to enable them to continue their work and, indeed, to aid their survival. From online meetings and telehealth conferences to distance learning and virtual happy hours, it is our need for human connection that will continue to inform how we leverage technology going forward.
