Old Mutual’s winning formula: Liquidity, safety, returns

Old Mutual Cash and Liquidity Solutions has achieved a major milestone, growing its assets under management (AUM) from R20bn to R50bn in just two years during what has essentially been a “flat cycle” for the sector. This exceptional growth underscores the strength of its value proposition.

The business, which is led by industry veterans Ian Ferguson and Sean Segar, has established itself as a significant competitor in the cash and liquidity market, providing institutional investors with an appealing alternative to holding cash in banks.

“Our growth demonstrates that institutional clients are seeking more than just a place to hold their money, they also want liquidity and capital protection. We offer solutions that deliver attractive yields, same-day liquidity and the convenience of a diversified basket of highly rated bank paper within a well-regulated environment. Clients benefit from competitive returns, operational flexibility and a trusted partnership that prioritises both liquidity and safety,” says Old Mutual Cash and Liquidity co-head Segar.

While Old Mutual Cash and Liquidity Solutions may only be two years old, Old Mutual has been in liquidity management since 1998. What the newly established business introduces is more than 50 years’ combined experience from its co-heads in the cash industry and a passion to ensure clients’ cash is optimally invested until it’s needed.

The cash investment solutions are managed by the distinguished specialist fixed-interest manager Futuregrowth Asset Management, an Old Mutual subsidiary, which manages the full range of fixed-interest funds on behalf of Old Mutual.

“Our biggest advantage is scale, which means we’re able to negotiate better-than-average rates with the issuers of the instruments held by the funds,” adds Segar.

“Our success is due to our innovative solutions, ability to compete head-on with banks in corporate cash management and commitment to building long-term trust with clients by delivering consistent yields better than those offered by bank call accounts, across our fund range.”

R1.45-trillion in cash reserves

Most corporates need to hold cash for operational purposes, and their cash levels can fluctuate enormously depending on their respective cash flow cycles. In addition, amid an uncertain macro-economic environment and volatile investment markets, corporates across several industries are sitting on growing levels of cash.

Segar says: “Corporate cash balances have more than doubled over the past decade, more recently because of significant contributions from companies exposed to resources, which have generated extraordinary earnings, leading to large corporate cash balances. The most recent SARB [South African Reserve Bank] data indicates that non-financial corporates (excluding banks, insurers and retirement funds) currently hold R1.45-trillion in cash reserves. This cash, which in recent times has been withheld from reinvestment, expansion or research and development due to ongoing economic policy and political uncertainty, is often left in bank accounts at sub-optimal yields.”

Segar notes that parastatals also contribute to the pool, with significant balances often sitting idle between grant receipts and disbursements.

“The build-up of cash presents a tremendous opportunity for specialised money market fund managers like us to partner with businesses and assist them to earn more interest without them having to compromise on risk or liquidity,” Segar explains.

The money market funds offer a compelling alternative for finance teams who need to hold high cash reserves that may need to be withdrawn at short notice, want the funds to generate returns, but also can’t afford to place the capital at risk.

“We see ourselves not only as custodians of corporate cash, but also as strategic partners to businesses needing a trusted partner in navigating demanding liquidity and capital protection needs,” concludes Segar.

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