Success for institutional investors is built on operational excellence, performance attribution, risk management, and cash management. Over the course of 2024 we’ll explore these themes in detail and highlight how each is integral to a high-performing multi-asset class portfolio.
Cash is king
Cash management plays an integral role in everything an institutional investor does. From fulfilling fiduciary obligations to making new investments, allocators always need acute visibility into their cash positions. In this article we explore the factors affecting investor cash flows today and highlights keys components of a thoughtful and well-planned cash management strategy for today’s modern allocators.
Private equity exit liquidity drying up
Recent quarters have challenged the private equity industry and many funds have experienced delayed distributions due to lagging M&A activity and uncertainty in the IPO market. For allocators the lack of liquidity in their maturing vintages means that they cannot rely solely on these distributions to fund future private equity commitments.
This challenge is magnified for investors who have recently increased their private equity allocation targets. Cash management becomes crucial for these investors as they divest from investments in other asset classes to ensure they have the necessary liquidity to meet their unfunded private equity commitments.
Cash management means attention to detail
When shifting allocations across a multi-asset portfolio, allocators need to pay close attention to the terms of each of their investments to understand exactly how much capital they have access to at any point in time. This means having clear visibility into the notice period requirements for redemption requests. Establishing a clear understanding of where and when liquidity is available means that an investor has the flexibility to reallocate their portfolio strategically and without suffering withdrawal penalties.
Tactical opportunities unlocked through cash management
A well-planned cash management strategy means that an allocator has clear visibility into their unfunded commitments, cash on-hand, and the amount of cash accessible over the coming 12-18 months, including relevant notice periods. With this level of visibility, an institutional investor can take advantage of short-term tactical opportunities while remaining confident in their ability to satisfy capital calls and capital obligations to stakeholders.
In today’s market those short-term opportunities exist in fixed income due to high interest rates. Where previously cash may have sat in escrow or a custodian account, today can now be put to work in high yield fixed income strategies that can be liquidated efficiently.
Cash management: a pillar of the Nasdaq Solovis platform
Cash management, along with operational excellence, performance attribution, and risk management are the four foundational pillars of the Nasdaq Solovis platform. Nasdaq Solovis helps asset owners gain instant insights across an entire multi-asset class portfolio and create context fast to drive decision-making.
Learn more about how Nasdaq Solovis provides institutional investors with full visibility across their portfolios in this masterclass session.
