New Quantitative Model Illuminates Money Market Investment Opportunities
San Francisco – July 08, 2020 – ICD, corporate treasury’s trusted independent portal provider of money market funds and other short-term investments, and advisory firm The Carfang Group have developed a new quantitative model for assessing risk-weighted investment opportunities in money markets. The firms will introduce the new model, Beta(m)™, in the webinar, “BETA(m): A Fresh Look at Tradeoffs & Opportunities in Money Markets,” on Tuesday, July 14, and in a whitepaper made available following the webinar.
“Balancing safety, liquidity and yield while adhering to corporate investment policies is never easy, especially when there is unrest in the markets as we saw in March this year,” says ICD Chief Marketing Officer Justin Brimfield. “Because the dynamics of the market are always shifting, corporations can’t just take a set-it-and-forget-it approach to their investments. Now ICD has a quantitative tool to assess the risks/returns of money market investment products.”
The Beta(m) model is based on Nobel Prize winning economist Harry Markowitz’s Modern Portfolio Theory (MPT), adapted for the money markets. MPT looks at volatility as a method for measuring risk, and states that a diversified portfolio is less risky than risk associated with each individual security within. From MPT, plotting The Money Markets Efficient Frontier allows investors to identify investment opportunities and to avoid investments that are not worth the inherent risk based on their return.
“Corporate investors usually evaluate short-term fixed income securities based upon their position on the yield curve. However, this methodology falls short when evaluating instruments with different pricing, trading and credit characteristics,” says Tony Carfang of The Carfang Group. “Beta(m) allows you to view your investment options on an apple-to-apples basis, allowing corporates to set their short-term investment strategy regardless of where they fall on the risk-tolerance spectrum.
ICD is treasury’s trusted, independent portal provider of money market funds and other short-term investments. We bring together the treasury investment community and the market’s fund companies to deliver unbiased access to over 300 investment products, leading market experts, and intuitive technology. Our award-winning ICD Portal is a model in the industry for trading, reporting and analysis. Focused solely on the needs of the treasury investment community, ICD is always putting Treasury First. Our expert service is offered through our Global Trading Desk, spanning London, Boston and San Francisco.