A Place for Portals

Treasury managers must strike a balance between the efficiency of money-market portals and the value of relationships between corporations and banks.

Every morning, while he’s waiting for his coffee to cool, Richard Green, assistant treasurer of Greyhound Lines Inc., pulls up an Internet connection and logs into Comerica Bank’s MoneyMarket Trader Web portal. He checks the company’s portfolio of money-market funds to see how much the investments earned in the overnight market.

He then peruses the 30 fund families offered by the Web site to compare one-day yields, and selects funds that offer the highest daily rates and fit Greyhound’s investment criteria — which include credit ratings and performance measures. Like most treasury managers, Green uses MMFs as overnight cash-investment vehicles to maintain liquidity while earning a competitive return.

Currently, Green trades $11 million in the funds daily. But that total will increase to about $50 million by the end of the year, when more travelers hit the road, increasing Greyhound’s revenues and the amount of cash earmarked for overnight investment. By the time his coffee cools — about two or three minutes from the time he logs on — Green has settled the trades via a single wire transfer, and logs off.

The portal technology, built and distributed by Cache Matrix LLC, uses an “omnibus” methodology, in which trades are consolidated and then settled through a Comerica custodial account in a single wire. The method, like the technology, is a big time-saver.

The first time Green used the portal, in December 2004, he picked up a 5-basis-point gain on his MMF portfolio in overnight trading by moving investments to higher-yielding funds not offered by his Merrill Lynch fund manager. Traditionally, fund managers offer proprietary funds owned by their parent companies.

Indeed, there’s no doubt that MMF portals offer more fund choices and transaction speed than the offline method of trading, in which treasury managers call brokers or fund managers directly to compare yields, place multiple trades, and settle by sending off multiple wire transfers.

But with such obvious, and proven, benefits, why hasn’t the technology caught on in a big way with corporate treasury departments across the country? The answer, it seems, is that abundant use of the portals could be seen as a threat to relationships between corporations and banks.

Follow the Investments

While portal vendors are tight-lipped about revealing exact customer numbers, it’s likely that hundreds of corporate treasury managers use MMF portals. And why not? Besides trading tools, portals provide managers with access to current portfolio holdings performance, prospectuses, wire information, fund applications, and more without leaving the centralized Web site. Further, portals provide a neat paper trail for managers who are required to comply with the internal-controls documentation provisions of Section 404 of the Sarbanes-Oxley Act.

The timing for portals is right, too, since corporations tend to have a lot of cash on hand now. In 2005 corporate cash and cash equivalents so far total $5 trillion, up from $4.7 trillion in all of 2004, according to an upcoming report by Treasury Strategies Inc., a consulting firm. Further, as cash accounts grow, more treasury departments are being instructed by management and boards to spread out investments over several fund families as a diversification measure, rather than sticking with a single fund’s product line, notes Tom Nelson of STN Money Markets, another portal provider.

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