Treasury teams must diversify their short-term portfolios
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Treasury

Treasury teams must diversify their short-term portfolios

Elevated inflation and interest rates have focused treasury attention on the importance of diversification, particularly for those with an environmental, social or governance focus.

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Illustration: iStock

One of the greatest risks for short-term treasury is a lack of diversification. In a survey published by Northern Trust Asset Management earlier this year, almost one in five (18%) of the treasury teams surveyed held between 80% and 100% of their short-term investment portfolio in bank deposits.

“Using money-market funds, and indeed ultra-short bond funds, in a diversified portfolio of investments enabled by a cash-segmentation strategy helps lower counterparty risk while maintaining liquidity within a short-term investment portfolio,” says Antulio Bomfim, head of global macro for the global fixed income team at Northern Trust Asset Management.

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Paul Mueller, Invesco

Paul Mueller, head of global liquidity EMEA portfolios at Invesco, refers to money-market funds as a key tool to reduce counterparty risk, noting that the investment manager would generally diversify its investments across at least 30 or 40 different issuers.

“We


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