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Yield opportunity in asset class with short term redemption

By David Charles - September 21, 2020

 

Some hedge fund strategies such as CTA's or many Long/Short strategies often generate significant cash positions. In the current environment with very low or even negative interest rates these cash holdings can be drag on performance. In a world where low interest rates and returns look likely to remain, managers need to look at all options to improve performance. In addition, with the impact of COVID many banks are seeing their balance sheets increasingly stretched.  Therefore, portfolio managers are looking for options to invest this cash to obtain a higher return while diversifying and improving their risk profile. The main problem is that these need to be short-dated instruments so that the liquidity requirements of investors can still be met.

Yield, funds security, costs and redemptions

redemption

Against this background, managers are looking to achieve yield, and a safe place to keep cash that does not involve a cost but ensures that they have funds available to pay redemptions on time.

 

 

Ease of use and consistency of payments

What is required is an asset class that is secure with known cashflow that is shorter than the redemption profile of the fund. It is also needs to be simple to use as portfolio managers will want to continue to focus as much time as possible on their core investment strategy.

Crossflow

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Crossflow with industry leading transaction and funds security, enables investors to achieve positive returns investing in investment grade names with short maturity dates.

A simple to use interface allows investors to select their requirements in terms of size, risk, currency and maturity. Crossflow's AI then allocates cash within these parameters generating returns and diversifying risk.     

 


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David is former COO and CRO of Credit and Convertibles at Man Group and was previously Managing Director, Global Head Risk and Capital Management, Global Markets at Deutsche Bank where he managed a balance sheet of €1trn globally. He has also served as Head of Risk for Asia at Gen Re and RBS as well being a former interest rates trader.

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