Asset managers allocate cash across numerous locations, including clearing houses, counterparties, prime brokers and elsewhere. Actively managing the treasury function enables investors to identify these cash pools, consolidate balances and make short-term investments to generate revenue.
Many asset managers consider treasury part of their operations unit and manage this function through manual, spreadsheet-oriented processes and support staff.
Forward-looking asset managers, however, have recognized the importance of treasury, not only in reducing operational risks and protecting assets but also in generating significant potential alpha — sometimes referred to as “treasury P&L”.
These firms have moved treasury to report to their front office and have made significant investments to streamline and automate this function.
Some organizations actively managing their treasury function have benefited from:
At the simplest level, these asset managers are locating inefficiently allocated cash and collateral, either sitting idle or otherwise not being used optimally, and putting those balances to their best possible use to yield additional revenue.
Hazeltree has conducted a survey of more than 80 of the world’s leading hedge fund managers (with AUM ranging from $2B to over $50B).1 Based on its findings, Hazeltree has determined that most organizations are focused on treasury management to capitalize on the below benefits, in the following order:
This paper explores these issues as we articulate a case for the costs and benefits of committing to active treasury management.
Realizing supplemental alpha, operational efficiencies and reduced counterparty risk is achievable for any asset manager willing to make the time and resource investment to optimize their treasury function. The path to active treasury management involves four essential steps.
“Ultimately, active treasury management is about much more than simply achieving greater efficiency and superior yield.”
1. To receive a copy of the Hazeltree hedge fund survey, please email firstname.lastname@example.org.
2. Return estimate based on Hazeltree analysis.
About BNY Mellon
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Hazeltree is the leading treasury management solution provider, serving hedge funds, asset managers, fund administrators, insurance companies and pension funds with powerful, proactive performance enhancement and risk mitigation capabilities that generate alpha from treasury, reduce a range of risks and streamline operations. Hazeltree’s integrated treasury management solution includes comprehensive cash management, securities financing, collateral management, counterparty management and margin management capabilities. Hazeltree is headquartered in New York with offices in London and Hong Kong. For more information, please visit www.hazeltree.com.
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