Last week Goldman Sachs Asset Management executives from the United States toured Hong Kong and Singapore to promote the firm's cash management and 'enhanced' cash management products to treasurers at Asian companies and financial institutions.
The firm is stepping up its wooing of Asian clients. Elizabeth Anderson, managing director of the asset management division in New York, says Asian clients are a small part of the firm's $110 billion of managed cash assets. Most of the Asian clientele consists of high-net worth individuals. While rich individuals may put cash into a range of currencies, such as the euro or sterling, to enhance returns, most corporate and financial group demand is for dollars, as that is the currency they operate in.
The firm sees an opportunity in this region because so much of corporate and financial institutions' cash is kept at a bank. "We think transparency [about the product] is important because Asians are not as familiar with the product," she says. She adds prospective clients that are used to keeping their cash at a bank lacking a superior credit rating may not initially appreciate the benefits of investing solely in highly rated paper.
There is a growing trend among US treasury operations to outsource cash management. The rapid rise in credit rating downgrades and defaults in America has prompted many treasury departments to let a professional manage their cash. Aside from the biggest companies, pension funds and financial groups, many treasuries lack the resources to track the money markets or to dedicate resources to credit research. The US money market funds industry now stands at $2.2 trillion.
Although the US market is large enough to allow for many players to run money market funds, she argues that the non-US market allows only a few players to amass the scale required. Goldman and JPMorgan are among the leading international cash managers in terms of assets.
"Our funds offer a diversified pool of highly rated, liquid instruments," Anderson says. GSAM's money market funds don't invest in paper with a maturity beyond 13 months, and maintain a weighted average maturity of not more than 60 days. They don't invest in futures or derivatives, just in commercial paper, certificates of deposit, time deposits and the repo market. "We use economies of scale to create term structures for clients, which is hard for one company's treasury team to do alone," she says.
Anderson acknowledges that some clients see a money market fund manager as a providing a commodity, but notes that the more sophisticated ones select managers to add value as well. "We differentiate ourselves in two ways," Anderson says. "First by our credit process, and second by our understanding how the client wants to use the product to produce an optimal portfolio."
The firm intends to roll out a US internet platform for cash management clients to its international clientele in the second quarter.
On the more aggressive end, GSAM is promoting an enhanced cash management fund that currently has $20 billion under management. This product seeks to add 50-7 basis points of outperformance versus a traditional money market fund, targeting groups with secondary (surplus) liquidity, and investing in sovereign, corporate, agency or securitized debt as far down the ratings curve as single-A, says Jim McCarthy, head of enhanced cash and short duration strategies.