In the March 2017 iTreasurer, we look at how to structure the portfolio with interest rate rises looming on the horizon, as well as an examination of a relatively unknown part of supply chain finance called trade credit insurance. In between we delve into potential flies in the ointment when it comes to M&A and a possible repatriation holiday.
Contributor Barb Shegog discusses portfolio strategies in an environment of rising rates. But also critical is not waiting for rates to rise before you make these adjustments. Whether the money is managed inside or outside, or in whatever instrument, make a move now and be sure the result is a flexible portfolio. “There is no more sitting on the sidelines to see how things play out. So waiting for rates to rise isn’t really an option anymore,” Ms. Shegog writes. Or for that matter, sticking to assets that haven’t risen in a while, like T-bills and repos, both of which have spent much of December and the beginning of the new year at subdued levels.
Next, iTreasurer highlights Standard & Poor’s view that despite a good M&A outlook, what could pose a challenge are antitrust forces. “[U]nder a holistically less stringent regulatory backdrop, antitrust enforcement will likely remain a hindrance to specific large transactions” this year, S&P said. The rating agency goes on to say that this could have negative credit implications, “particularly if better credit quality was an anticipated outcome of the transaction.”
Our peer group meeting summary for this issue is from the NeuGroup’s Treasury Investment Managers’ Peer Group or TIMPG. Corporate investment managers have a host of issues to be concerned about, among them low rates, floating NAVs, credit issues and new MMF regulations. In this uncertain atmosphere, members—along with their compatriots in the market—have been left to ponder where to put cash next.
Next, iTreasurer delves into a small corner of supply-chain finance called commercial credit insurance, also known as accounts receivable insurance. Commercial credit insurance is the working-capital credit instrument that protects against counterparty default or simple nonpayment in the supply chain. Treasurers are finding that the supply chain can offer companies and their treasurers multiple platforms to facilitate consistency and liquidity. Yet underneath the new technology there remains a core question to answer for the supply chain to work. What is the most efficient source of credit to enable the supply chain?
Finally, in “Repatriation: Be Careful What You Wish For,” iTreasurer takes a look at a report on some of the possible downsides of repatriation. That’s because repatriation might result in “substantial share-repurchases that would have an immediately negative credit impact if they hadn’t already been factored into the agency’s long-term credit analysis of the company’s credit.” Then again, this could be modest; and advocates could argue the benefits of $1 trillion returning to the US far outweighs some of these impacts, particularly considering that most of those companies with lots of cash overseas—Apple, Oracle, Cisco, et al.—aren’t exactly unhealthy. But, food for thought.
Enjoy.