Are Your Reserves Long-Term Capital?
Sizing near-term reserve funds should be guided by analysis of cash flows, endowment reliance, available liquidity, and capital needs. Any reserve funds not needed in the near term can be considered longer-term capital. When investing reserves as long-term capital, institutions should consider the policies needed to support responsible reserve fund management, how compatible the funds invested together are, and whether such investments will jeopardize the long-term investment pool.
The historic milestone reached when the white smoke emerged from Brussels and London on 24 December 2020 represents the end of the beginning in the establishment of the new relationship between the UK and EU, rather than an end in itself. Nonetheless, with the lingering threat of a tumultuous no-deal exit now removed, the headwind that this represented to the performance of UK assets has now subsided.
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Investors have predominantly relied on developed markets sovereign bonds for defense in balanced portfolios, but low rates have diminished their diversification characteristics.
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