• Global Frameworks: CFA Level 1 (Fixed Income), Money Market Liquidity Guidelines.

1. Investment Criteria for Short-Term Corporate Portfolios
When a company generates cash surpluses, the treasury invests these funds in short-term instruments to earn a yield while waiting for future operational needs. Corporate cash investments prioritize safety and access to funds over maximizing returns, focusing on three core criteria:
  1. Safety of Principal: Minimizing credit default and market risks to preserve capital.
  2. Liquidity: Selecting instruments that can be quickly liquidated for cash without significant price discounts.
  3. Yield: Earning a competitive market return once safety and liquidity requirements are fully met.

2. Allocation Matrix for Short-Term Funds
Treasuries divide cash portfolios into separate tiers based on when the funds will be needed:
                  ┌────────────── Cash Portfolio Tiers ──────────────┐
                  ▼                                                  ▼
         [Operational Cash Tiers]                            [Strategic Surplus Cash]
   Overnight Repos and T-Bills;                          Certificates of Deposit and CP;
   Immediate liquidity, near-zero yield.                 Locks in yield across months.

  • Operational Tier: Cash needed for immediate weekly expenses, invested in ultra-liquid overnight repos or short-term Treasury bills.
  • Reserve Tier: Precautionary cash buffers invested in negotiable certificates of deposit, commercial paper, or high-quality money market mutual funds that lock in yield across 30- to 90-day horizons.

3. Yield Calculation Standardizations
To accurately compare returns across different money market instruments, treasury analysts convert raw returns into standardized yields, such as the Bond Equivalent Yield (BEY) or Effective Annual Rate (EAR), which accounts for compounding frequencies over a 365-day year.
 
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