I'm Debbie Cunningham, Chief Investment Officer and Executive Vice President of Federated's Liquidity Portfolios.
Why should investors consider cash as a core asset class again?
Cash is definitely considered a core asset class for three main reasons. The first would be stability of principal and although the 2016 reforms, Money Market Reforms, attempted to generate some concern about that stability of principal, in fact, in practice since 2016 the stability in the price of these products has been maintained. They are a one dollar NAV product and that can be one dollar to two decimal points, or the penny on the retail side, or to four decimal points where you might have basis point or two of movement on an occasional basis. Nonetheless on a periodic basis, you're maintaining a stable net asset value. Liquidity is one of chief, second reasons, that would be considered for why cash is an asset class on a major basis, again. Liquidity is something that, in the cash markets, allows you to go into that market and back out of that market on an instantaneous basis, without any type of notification. That's different than the longer term fixed-income and equity markets and as such, it offers additional flexibility. 10% is required in overnight cash and liquidity for a money market fund and 30% in weekly cash and liquidity. In fact and in practice, these portfolios actually generally maintain much more than that and therefore offer the opportunity for investors, the ability to go into and out of the market as they feel is necessary, taking advantage of that liquidity. The third aspect would be the return in the marketplace and currently at returns that are above 2%, we're beating the inflation return, we're beating longer term fixed income returns, at this point, and we're beating the S&P dividends yield. So, it's an attractive market when you're looking at other income type of vehicles in the marketplace and we expect that to continue throughout the remainder of 2019.
Disclosure Views are as on June 5, 2019 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Past performance is no guarantee of future results. There is no guarantee that a stable net asset value can be maintained in the future. Federated Investment Management Company 19-10087 (6/19)