The challenge
IOM was holding approximately US$1.5bn of excess liquidity across USD, EUR, GBP and other G10 currencies cash balances. The organisation is focused on diversifying and reducing counterparty credit risk within its cash management strategy and liquidity planning and to enhance sustainable development in their portfolio. However, with a small treasury team, very little financial infrastructure and financial regulations that limit the investment to a short term horizon IOM’s cash investment options were limited historically to unsecured bank deposits and money market funds.
“We were looking for a simple, cost-effective way to reduce credit risk exposure to the financial sector, by diversifying our investments into government, SSA and/or corporate holdings. Within this low-risk framework, we also wanted to earn a fair return on our cash holdings and minimise the drag caused by negative yields on our EUR cash balances,” explains Malcolm Grant, Head of Treasury.
The solution
IOM selected the TreasurySpring Fixed-Term Fund (FTF) platform which offered a simple way to minimise risk and maximise returns on excess cash balances, delivering access to market-leading cash investment options, through a single onboarding to an intuitive digital portal.
Following completion of an extensive due diligence process, IOM was able to begin to diversify its cash holdings into multiple products across multiple currencies, achieving its dual goals of decreasing and diversifying risk and increasing returns.
Best practice and innovation
Through a single online onboarding process that takes minutes to complete, IOM gained access to an ever-growing universe of the highest-quality cash investment options across multiple currencies and product types. Cash investment products are organised into three core verticals; governments, banks, and corporations, and always offer access to investment grade (IG) counterparties.
The platform provides a unique opportunity for clients to invest excess liquidity in the same way as the largest, most sophisticated global treasury teams, without the need for any of the infrastructure, connectivity or resources typically required to do so. IOM has already gained access to multiple products, in multiple currencies from multiple IG issuers that it could not access previously and now has the option of continuing to invest in FTF products daily and all through a single point of access.
Key benefits
- Once onboarded to the new platform, IOM gained immediate access to new cash investment options.
- IOM now holds several different FTFs in USD and EUR, offering superior returns on an absolute and risk-adjusted basis vs the previously used deposit and MMF products.
- Diversification from the financial sector and access to SSA counterparties in line with IOM’s objective to enhance sustainable investments.
- Risk reduced.
- Higher returns earned on its excess cash.
- Execution simplified with roll-overs to deliver light-touch, high-value investment strategy.
“Our new FTF platform is unique, being the only offering of its kind. It delivers a smart solution for forward-thinking treasury departments to invest excess liquidity in the same manner as the largest financial institutions, without the need for any financial infrastructure or additional internal resource. By using this platform, we have been able to advance our goals of risk reduction across currency, products, and tenors, whilst reducing the negative carry on our EUR balances and earning additional yield pick-up on our USD holdings. As such, we are now operating a market-leading cash investment strategy, which was simply not possible before we implemented this solution,” says Marion Barre, Assistant Treasurer.
The Adam Smith Awards is the industry benchmark for best practice and innovation in corporate treasury. The 2021 Awards attracted a record-breaking 309 nominations spanning 40 countries. To find out more please visit: https://treasurytoday.com/adam-smith-awards.
