Cash & Liquidity Management

A flexible investment policy: a firm foundation for better cash segmentation

Published: Aug 2017
J.P. Morgan Asset Management Thought for the Month – building stronger liquidity strategies – let's solve it.

August 2017

For corporate treasurers, a well-articulated cash investment policy is the vital first step towards bridging the gap between shifting market circumstances and investment goals. But the best investment policies also need the flexibility to adapt to changing market conditions.

Stay up to speed with market changes

With market expectations pointing to the end of quantitative easing purchases by the European Central Bank and a potential interest rate rise from the Bank of England, corporate treasurers face one overriding challenge: to ensure their investment policy is flexible enough to allow practitioners to respond to higher interest rates. Even in an environment where rates are changing and the yield curve is adjusting, investors may have opportunities to take advantage of these movements.

Seize opportunities as they happen

More respondents are updating their investment policies to ensure that they provide the flexibility needed in the new rate and regulatory environment, with our recent 2017 Investment PeerView™ Survey showing that half of all respondents plan to change their investment policy in the next 6-12 months for this very reason. However, more than three-quarters of respondents said it would take a moderate or significant effort to implement a change – suggesting that planning well in advance makes absolute sense.

A good investment policy will most likely prioritise cash segmentation and give treasurers the flexibility to take advantage of different investment solutions. For example, investors may achieve an improved yield by investing further out the yield curve or they might be able to place cash in shorter-dated instruments to benefit from spread differentials. Indeed, PeerView found that more than 70% of respondents can forecast their cash flows out for a month or longer, while just under half can forecast out a quarter or longer.

Keep it flexible

Setting out a solid cash investment policy is just the start of the story for corporate treasurers. Higher interest rates should create more opportunities for treasurers to exploit – for those that can segment cash as effectively as possible. That’s where a dynamic, flexible investment policy can really pay off.

To read more about writing and implementing an effective investment policy, please visit Policy

For the full results of the 2017 Investment PeerView™ Survey, please visit

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