From the conference issue of Exchange magazine
The theme of this issue of Exchange magazine is "The House that Treasury Built." As we remember from childhood, the point of the verse "This is the House that Jack Built" is the number of people whose daily activities are supported by or linked to a single structure.
Just so in business, many departments, operations, initiatives and ultimately jobs are supported by the work of an organization's treasury department, whose function it is to make sure the enterprise has enough cash on hand to meet its daily needs.
If one of the most basic treasury functions is making sure the organization's cash is deployed optimally in the short-term, then a recent event has the potential to raise some eyebrows.
As we go to press late September, Deutsche Asset Management has filed a registration statement with the Securities and Exchange Commission for a money-market-like fund with a floating net asset value (NAV). This particular filing has generated a flurry of news reports because it comes amid calls for money fund reform.
An electronic filing says the DWS Variable NAV Money Fund, which is still in registration, will be managed according to the money-market fund rules of the Investment Company Act of 1940, and that it will maintain a dollar-weighted average maturity of 90 days or less.
With its proposed variable NAV, industry observers are calling the fund more of an ultra short-term bond fund. Reports say the rationale is to reduce risk by allowing redemptions at a floating price rather than forcing all holders to redeem at the same rate.
Looking at all the news this single filing has generated, one might imagine that it had the potential to change the way we think about money market funds, which, although not the main short-term investment vehicle for treasury departments are certainly an option that many corporates employ. If this type of fund were approved and spawned clones, corporate treasurers would have to think carefully about the impact that the floating NAV would have down the line.
But on the other hand, it may be no more than good product diversification. "I think Deutsche just wanted to cover all their bases," said Brian Kalish, who heads AFP's finance practice. "If there are investors who want a floating NAV fund, the company wants to be in a position to offer it to them."
The Bottom Line column appears monthly on the last page of AFP Exchange magazine.See last month's column, Twitter Fledges, Seeks CFO