In March 2020, U.S. money markets showed their strength as they successfully weathered unprecedented market stress and an overwhelming flight to quality. Companies shifted assets, drew down credit lines and issued debt as they furiously worked to increase the liquidity and safety of their cash. As the dust settled, however, many companies were left sitting on large cash balances, leaving some ready to venture into higher-yielding money instruments.
For many corporates considering their next move, two questions remain: Is safety, liquidity and yield still the best way to achieve an efficient portfolio, and What – if any – investment opportunities exist? ICD teamed up with The Carfang Group for a technical deep dive to find out.
This whitepaper presents a compelling approach to Modern Portfolio Theory, adapted to money market instruments. The results reveal a stunning confirmation of the efficiency of the money markets, a demonstrable window of opportunity for Prime and FICA instruments, and a new model for assessing tradeoffs and opportunities in money markets going forward.
