The Operating Asset Challenge and Opportunity
Over our more than four decades of working with nonprofit institutions we have observed that many have excess liquidity and do not utilize best investment practices such as timeframe arbitrage and diversification in managing their operating assets. Commonfund is offering a comprehensive investment program structured to address this situation as many large operating entities are rethinking their fully liquid portfolios. We believe best practice is to transition these investors from a daily liquid portfolio to a more appropriate diversified limited-term portfolio. Dependent upon the risk tolerance of the individual organization, the investment solutions may range from fixed income only, to portfolios that include allocations to equities and alternatives. Due to liquidity needs and limited risk “appetites”, these portfolios should not be endowment-like in return expectation, or volatility.
Commonfund Cash Programs
Currently Commonfund offers investment programs in Liquid, Contingent and Core levels for higher education investors. We determine the “liquidity level” to be investments for daily needs to one year, “contingent level” to be investments not needed for three years and “core level” to be up to five years. For higher education institutions with significant cash portfolios we offer Commonfund Treasury Solutions program. The Treasury Solutions program offers operating asset investors a transition from a daily liquid portfolio to a more appropriate diversified limited-term portfolio. Commonfund plays an advisory role as well as investment provider in Treasury Solutions relationships. The program is flexible and completely customized to the risk and return needs of each investor using the full range of options described in the chart below. The program allows cash investors to earn a competitive return on their balances while maintaining the necessary risk controls and liquidity to reliably fund operations.