The NeuGroup’s Treasury Investment Managers’ Peer Group looks at counterparty risk, for yield.
With threats of another recession looming and banks struggling to digest old and new toxic assets and implement cumbersome regulations, companies are turning their focus to counterparty risk. They also continue to look for ways to generate yield. These are just a few of the items members of the NeuGroup’s Treasury Investment Managers’ Peer Group (TIMPG) will review at their meeting October 26-27 in Houston, Texas.
The tumultuous markets and stagnant economy. A standing agenda item since the crisis began has been an economic update and market outlook. For the coming meeting’s update, members will consider all the latest issues that have had an impact on the economy and how this in turn will affect investment management decisions going forward. This includes the growing fragility of European banks, debt and economies; fiscal strains and policies in the US; and actions and inactions by the Federal Reserve.
Counterparty risk making a comeback. Counterparty risk was in the spotlight during the early part of the financial crisis as many financial institutions were close to failure or in some cases, nationalization. This dark period was followed a year or two later by generally strong returns to profitability for banks. However, with the government (the very savior of the industry), now in attack mode with overbearing regulation and new lawsuits announced almost weekly, financial institutions are beginning to buckle and investors are taking note. Pressuring them further are the growing risks in Europe. The members will spend time discussing how they are currently managing their exposures to banks both in the US and abroad.
Looking for options (or anything with yield). Members are always interested in learning about new products or strategies coming to market that can improve their returns. This meeting has a few more than normal, however. One session will be devoted to a discussion on the use of non-MMF mutual funds and exchange traded funds (ETF’s) led by a panel consisting of member companies that have some exposure to these products.
Members will also address how each are segmenting the duration tranches of their portfolios from long, intermediate and short.
Meeting sponsor Payden & Rygel will round things out with some of its recommendations for how to enhance returns including the use of emerging market debt, which according to one of the partners has seen an increasing number of investment grade issues. The firm will also explain an “absolute return strategy,” in addition a to a product called SHIP (stable high income portfolio), described as a high-yield B/BB portfolio with under three-year duration and yield north of 6.5 percent — designed for income generation.
The meeting will take place October 26-27, 2011 in Houston, Texas at Hewlett-Packard and is sponsored by Payden & Rygel.