Not all cash is alike

Question: How can investors diversify cash investments?

Steve Chiavarone: Well, as a matter of course, just philosophically, we're believers in diversification. We also understand that not all cash is alike, if you will. Right? There's different uses of cash. There's different durations of cash and there's different timeframes. So we are a big believer in investing across the short end of the yield curve, not just one specific place as an example, dependent on cash needs and your strategic goals. What I'd say is that as we think about that zero to three year point curve, there's some areas that we find attractive and there's some themes that will play through in our current thinking. And I'd say what those themes are is first off short duration. While we do think we'll hit a point at some point, maybe, over the next 12 to 18 months where you want to lengthen duration, we don't think that time is now as the market is still pricing in. I think, a Fed that's going to be a little bit more aggressive than we thought they would be even a month ago. And so we think the bias is for rates to move higher and so we prefer shorter duration assets. That's why we say that cash is king right now. That's why we particularly like the money market space and we're not afraid of credit in the money market space. So we think, prime money market funds are well positioned. In addition, though, there are opportunities to move down either from intermediate duration fixed income into the two to three year part of the curve or from that low duration two to three year part of the curve into the ultra short part of the curve. And I think the shorter the better. So when you think about ultra short funds that have the shortest duration, micro short if you will, we think that those are particularly well positioned. In addition, up in quality is the move right now. As growth is deteriorating and as we have concerns about potential recession, the further out the curve we go, the less likely we are inclined to take credit risk. So while I might be okay with credit risk in the money market space, I'm probably going to be more inclined towards either munies or govies, as I get into that ultra-short space, and certainly as I'm in that low duration space. And those are really the big themes. It's about shorter duration, higher quality, and we still think for the time being, if you can find floating rate securities that are attractively priced, that makes sense throughout that short end of the yield curve.