Unlocking value from overlooked treasury assets
Effective management of short-term liquidity portfolios is a vital part of any institution’s long-term financial and contingency planning.
This is especially true for charities and universities, where maintaining sufficient liquidity is essential to meet known spending requirements and provide a buffer for unexpected events.
In this brief paper, we consider various options available and discuss how behavioural biases can be managed to optimise short-term portfolios for the desired outcomes.
We believe that adopting a total portfolio approach to managing short-term liquidity assets could add more than £30 million in relative value to a typical UK university* over a 20-year time horizon, without substantially increasing risk.
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Operational cashfor immediate payment needs such as payroll and supplier invoices.
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Short-term deposits (overnight–30 days)to serve as a working capital buffer and cover predictable shortfalls.
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Short-to medium-term deposits (one to 12 months)for planned or potential commitments, grant cycles, and project spending.
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Liquidity reserve (>12 months)reserves and contingency capital that could be invested in higher-yielding, short-term fixed-income assets.
While this framework is logical, a fragmented portfolio can lead to suboptimal outcomes. We favour a total portfolio approach to risk management, supported by strategic risk modelling and liquidity planning that considers the entire portfolio rather than isolated silos.
Download the paper to learn how we believe this helps maintain a long-term focus and limit the impact of behavioural biases.
