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Excess cash investing options?

I am curious what investment options are bringing you the best returns on excess cash you need a short term solution for?  My clients have $10M or less in excess generally.  Thanks!


Mark Stokes
Title: CFO
Company: Private
(CFO, Private) |

I'm sure you know this, but it depends largely on things like risk tolerance, availability needs and goals for the money. For most companies $10M is not a lot of operating funds and thus you would drop it into a money market sweep account or the like at a major institution (bank) which is very safe, extremely liquid, and won't get you fired! You're not going to make much money, but that's usually not a priority with that amount of corporate funds: keeping it is the priority.

If you are looking at longer duration and more return then you could look at investing in specific funds through a fund manager and laddering those investments to give you periodic and predictable access to the funds.

Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

If the needs are expected to be fairly immediate, your focus should be principal protection and not return in the current market as returns are funtionally zero for short-term. High quality corporate paper - a "ladder" of ten year notes - might work for longer term invesing. After 30 years of declining real interest rates, increases are likely, for up to 30 years, the typical cycle. Beware long notes with low coupons.

david waltz
Title: Assistant Treasurer
Company: Integrys Energy Group
(Assistant Treasurer, Integrys Energy Group) |


Keep in mind that according to financial theory, higher returns equals more risk. I discussed this in a post called "Metric Mania" on my Treasury Cafe blog ( ).

There is a reason that Auction Rate Securities paid a higher return than Variable Rate Demand Notes, and why some money market funds yielded higher than others. In both cases there was a real risk of illiquidity, which people found out in 2008.

Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

In addition to my earlier comments, I personally use Pimco's Total Return Fund, and a Vanguard short duration corporate bond fund, which your clients can use if the risks are tolerable. The risks are low, but certainly not negligible.

Topic Expert
Randy Miller
Title: Partner
Company: CFO Edge
(Partner, CFO Edge) |

In the past I have used Corporate paper as an easy way to park excess cash for a short term. We used to use it for as short as 3 days just to keep the money working over the weekend. The returns aren't that great, but it is better than a bank and for the short term the risk is very minimal.


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