Varied regulatory impacts caused by Basel III, Money Market (2a-7) Rule changes, Dodd-Frank, and the supply/demand dynamics for high-quality securities suggest that it may be time to review your investment guidelines. This review will allow you to re-evaluate whether your current cash management options fully reflect investment considerations available today and in the near future. In some cases, no investment policy changes will be required, but a closer look may reveal additional investment opportunities and possible language revisions.

We offer some ideas for consideration below that are designed to highlight general investment policy content to revise along with the various short-term investment products and the concept of defining your liquidity “buckets” with an active segmentation strategy by tiering your short-term investments based on current and forecasted cash requirements.

General Investment Policy Considerations

• Make sure your investment policy is broad enough to incorporate all money market fund classifications and operational requirements. For example, it is important to include language that allows for floating NAVs, direct securities, money market mutual funds, short duration mutual funds, private funds and/or short duration separate accounts.

• Accredited investors and qualified purchasers may want to consider adding the use of a private fund(s).

• A tiered investment approach may allow you to subscribe to a specific objective for each “liquidity bucket” (see illustration on tiering cash).

• Is a National Recognized Statistical Ratings Organization (NRSRO) a requirement for you to assess the investment suitability of your cash investments? If so, you may want the investment policy to include the requirement without a reference to a specific NRSRO to provide greater investment flexibility.

• Are you currently in dialogue with your bank(s) relative to their appetite for deposits? What are their plans in the short and long-term for deposits and anticipated Earnings Credit Rate (ECR) rates?

• Are there assets that require access to non-U.S. dollar currencies?

Given the current cash management environment, institutional investors should be rethinking how to manage their cash. BNY Mellon Fixed Income Solutions offers a diverse set of products that may improve income and/or return potential across the spectrum of available cash pools — and with a lower risk profile than might be expected.

Creating an account plan using a “tiered” investment strategy can help break down your inventory of domestic and global cash to provide the necessary liquidity and income potential for your overall portfolio

Balancing risk tolerance and investment flexibility will be the key to putting your cash to work. Is it time to optimize and update your investment policies?

If you have any questions regarding the above or if you need sales information, please reach out to your BNY Mellon Fixed Income Sales Representative.