Separate Accounts For Short-Term Investing?

As the SEC contemplates new rules for money funds, customized accounts are seen as a possible alternative.

As the Securities and Exchange Commission considers tightening its regulations for money market funds, separately managed accounts have been touted as a possible alternative if companies decide to shift assets in response to the new rules. Such accounts are essentially customized money funds; they allow a company to set guidelines for how the money in its account is invested.

“It appeals to people, the idea that they can pull together a portfolio that’s specific to their needs,” said Michael Gallanis, a partner at consultancy Treasury Strategies in Chicago. “If you do not wish to actively manage accounts on your own, this seems to be the next best choice.”

Lamle said he expects to see some money leave mutual funds for separate accounts: “Not a flood, but a trickle.” But he sees the shift having more to do with companies’ interest in moving out the yield curve.

With short-term interest rates so low, many companies with excess cash have extended the maturity of their investments, venturing out to hold securities maturing in a year, or two or three years. “Often those are in separate accounts,” Lamle said, in part because few ultra-short bond funds are of sufficiently high quality to satisfy corporate investors.

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