Origins

Kevin Cook, CEO and Co-Founder of TreasurySpring dates many of the founding pillars of the cash investment platform he co-founded with Matthew Longhurst and James Skillen in 2016 to the trauma and chaos of the global financial crisis (GFC).

Speaking in an interview with Treasury Today from the company’s Mayfair offices in London, Cook recalls the death spiral in fixed income as global investors demanded their money back in the desperate scramble for liquidity in the 2008 crisis. Back then he was working in a hedge fund where strategies had embedded maturity transformation risk – aka borrowing money short term to lend long term – and the crisis exposed a dramatic and painful mismatch in the fund’s assets and liabilities.

The importance of investors always balancing their assets and liabilities, especially given the speed at which liquidity can evaporate in a crisis, is a founding principle at TreasurySpring. As engrained is the importance of segregation which, unlike typical fund vehicles, offers better support for investors wanting to get their money back alongside a wary respect of the dangers of highly concentrated unsecured exposure to the banking sector. “The lessons learned from the GFC and Lehman’s collapse have gone on to influence a lot of what TreasurySpring does today,” reflects Cook.

Fast forward a few years and the next genesis of TreasurySpring came from Cook’s observation that scant cash investment opportunities existed for investors like corporate treasurers who sit outside the capital markets.

In the years after the GFC, treasurers continued to put their cash surplus in low yielding bank deposits or money market funds (MMFs), mostly via unsecured investments. Alternative, return yielding investments like government bonds or accessing the repo market to lend to banks on a secured basis; the opportunity to lend to other government entities to diversify risk or even invest in a different currency and hedge it back, were few and far between.

A treasurer seeking to invest in government bonds to diversify the company’s cash holdings away from the banking sector would struggle to execute. The process requires a Bloomberg terminal, the ability to participate in the auction and settle the underlying transaction, a custody account and a dealer, he lists.

All investments are risky, but the closest thing to risk free in any currency is government debt. Even during bouts of volatility triggered by brinkmanship around the US debt ceiling or the UK’s gilt crisis (“a liquidity issue not a credit issue”) government debt remains one of the safest investments. “The risk of the government not paying is lower than the risk of depositing money with a bank,” he says.

Spotting an opportunity, Cook, working at an asset manager at the time, began developing the infrastructure to support these kinds of cash investments for investors beyond the usual cohort of hedge funds and investment banks. Persuading risk-averse corporate treasurers to tap into these strategies required putting in place the architecture between the capital markets and treasury to allow institutions, irrespective of their expertise, to pipe into the same breadth and quality of cash investment options.

Roll on 2016, and TreasurySpring sprung into life offering organisations the ability to tap diversified exposure to banks, government bonds and the repo market, avoiding risks like concentrated bank exposure and maturity transformation and the opportunity to access better returns than bank deposits or traditional MMFs.

“The investment products we offer are not like normal cash products that earn an extra ten basis points here or there or encourage treasurers into risky investments that are marketed as cash but turn out not to be,” he says. “For us, there has always been a clear purpose to try and help the treasury community to manage their cash in the same way that some of the smartest people on the planet manage their cash.”

How it works

Since TreasurySpring launched its first fixed term government bond fund in June 2018 the company has issued over £100bn of fixed-term funds to over 500 clients spanning the asset management community as well as a cohort of treasury teams at listed MNCs, SMEs and start-ups.

“We are all about democratising access to cash investments,” says Cook. “The client buys the fund and the fund then buys the treasury bill. The treasury bill sits in the fund and at the end of the fixed tenor the client gets their money back with a return. They have the same exposure as if they had directly bought the treasury bill, but none of the hassle.”

TreasurySpring also offers cash investors access to the repo market. In the wake of the GFC a large part of the financial world only accepted secured lending, yet as in government bonds so in repo, the barriers for treasurers to access the market are high. TreasurySpring provides clients with secured bank lending, allowing corporates to lend to banks and access the repo market via its platform. “We offer access to many of the largest global investment banks already and are adding access all the time to help our clients reduce risk and swap unsecured deposits for secured exposure that reduces risk.”

Alongside government and bank secured fixed term investments, a third product type gives access to large corporates providing another seam of diversification for treasury investors. Here TreasurySpring is also working with the London Stock Exchange (LSE )to develop sustainable accreditation or identification for the underlying corporates looking for investment so investors can judge their green credentials.

“Some entities invest money for six months, others want access to our shortest product on offer which is just four days. The unifying characteristics amongst the company’s diverse client base is demand for safe investments that are simple and quick to execute,” he says.

The future

Cook notices a growing sophistication amongst the platform’s treasury investor base. More corporates are building out their technology stack and introducing new levels of connectivity with APIs. They are integrating large TMS and connecting with other tech platforms to support reporting and treasury management, he says.

In 2025 he predicts moves in interest rates will be a key focus for cash management strategies as investors change the tenor of their investments to better match their assets and liabilities. “If a client believes rates are on a downward path they might lock into fixed terms further out. In an environment of rising rates, they might roll into shorter products.” If 2025 brings volatility in fixed income markets, he expects a flight to quality that sees investors move out of bank exposure into government debt. “Investors will become more focused on being in secured products with large global names,” he predicts.

As TreasurySpring continues to muscle into the lucrative cash investment business, Cook insists the company is not in competition with banks or bent on disintermediating the sector. Treasurers want relationships with their banks and will always work with asset managers for overnight liquidity. “This is not something TreasurySpring offers,” he says.

Moreover, the company has no aspirations to offer advisory, underwrite bond issuance or become a bookrunner in initial public offerings. To prove his point, he says TreasurySpring now offers 90 different bank issuers for investors via its platform and makes sure clients can go via TreasurySpring to their relationship banks in a secured investment. “It means treasurers can continue to support partner banks via secured investments as well as traditional deposits,” he concludes.