Some executives at pension funds, endowments and foundations are borrowing alternative investment tools to boost returns on cash generated by manager terminations, contributions, rebalancings and securities windfalls.
The adoption rate is low, due to lingering biases about cash management.
"Cash management is the stepchild of the industry. The only time (most) people pay attention to cash is when interest rates are really high or when rates are really low. We kind of feel like Rodney Dangerfield. We get no respect," said Diane Mix, president and principal, Horizon Capital Management LLC, Chicago.
The reaction of Steve Holmes, president, Summit Strategies Group Inc., St. Louis, was typical of many investment management consultants. "Our idea of cash enhancement is to get rid of it," Mr. Holmes said. "We try to get our clients to minimize the cash in their portfolios so they are always fully invested. Clients can get enough liquidity when they need cash for new investments by selling or rebalancing from other asset classes."
Observers say that kind of attitude about cash is likely to change as institutional investors get more vigilant about squeezing return out of every dollar they invest.
"With investors looking everywhere they can for return, this area will begin to see a lot of action," said Jon Bauman, executive director of the $31 billion Teachers' Retirement System of Illinois, Springfield.