The events over the past week continue to remind us that the primary tenent of cash is safety. Uninsured balances and liquidity considerations at certain financial institutions carry risk.
Below are a few highlights that may be helpful. These reminders are especially key for business owners, corporate cash, family offices, non-profit organizations, investment companies with pending investment needs, and entities holding excess cash.
Piton manages three ultra-short duration “Cash Management” SMA strategies with a focus on safety, liquidity and yield (tear sheet attached). These SMAs can be completely customized to meet client needs. We can provide solutions for any definition of “cash” and assist with creating guidelines as well as implementing and managing portfolios to those guidelines.
In today’s interest rate environment, these portfolios not only provide risk reduction, but also provide compelling yields.
- Piton Tactical Government Cash: 4.65% Yield w/ 0.37 duration*
- Piton Tactical Ultra-Short Duration Cash: 5.05% Yield w/ 0.60 duration*
- Piton Tax-Exempt Ultra-Short Duration: 2.85% Yield w/ 0.87 duration*
Please reach out to us to help review your clients current cash management positioning and provide recommendations for potential enhancement.
- Cash Should Be Managed & Diversified vs Sitting on a Bank Balance Sheet: When reviewing companies with SVB exposure last week we saw companies with hundreds of millions of dollars in cash balances with one bank. This is excess risk. Cash should be actively managed through cash-equivalent assets such as ultra-short term (1-3mo) U.S. Treasuries, High Grade Corporates and Money Markets to reduce concentration risk.
- Brokerage Account Insurance Amount > Standard Bank Account Insurance Amount: The Securities Investor Protection Corporation (SIPC) protects against the loss of customer assets in a brokerage account. SIPC provides up to $500,000 of protection for brokerage accounts held in each separate capacity (e.g., joint tenant or sole owner), with a limit of $250,000 for claims of uninvested cash balances. Compared to the FDIC standard deposit insurance amount of $250,000 per deposit per insured bank.
- Segregated Brokerage Account Assets vs Pooled & Loaned Bank Account Cash: Brokerage assets we manage on behalf of clients are held in an account titled in the clients name at a qualified custodian. The SEC’s Customer Protection Rule (Rule 15c3-3) safeguards customer assets at brokerage firms by preventing firms from using customer assets to finance their own proprietary businesses. Client cash deposits invested at a broker-dealer are maintained in Special Reserve Accounts for the Exclusive Benefit of Customers, as required by the SEC’s Customer Protection Rule. It is a violation of SEC rules for brokerage firms to merge customer assets with their own.
*as of 3/16/2023