Some take advantage of opportunities to pick up yield; others play it safer and stick to government money funds.
The Covid crisis has illuminated where corporate cash investors sit on the risk tolerance spectrum—a point underscored in a Virtual Interactive Session sponsored by ICD this week that gave some NeuGroup members a clearer picture of where they stand relative to their peers.
Career risk vs. opportunity for yield. Hearing what some peers have done “reinforces how conservative we really are,” said one member whose company “took a hit” in an ultra-short duration fund as the pandemic unfolded and “was not used to seeing a dip” in its portfolio.
- The company’s resulting risk aversion, “with everyone gun-shy,” has made taking any chances to “get a few more bips” an unacceptable “career risk kind of thing,” he said. The company is now sticking with government money market funds.
- On the other end of the risk spectrum sat a multinational that, like others, raised lots of cash and liquidity in the early days of the pandemic. A member from this company took the stance that “we have to look for opportunities to invest that cash,” this member said.
- “Although we didn’t know the exact timing or size of our cash needs, we were able to assume that the majority of this balance would be around for at least a number of months, so in that situation prime funds worked out.”