IME CORPORATE TREASURY SOLUTIONS
IME Corporate Treasury Solutions collaborates with corporates towards creating a board approved investment plan that provides an optimal balance of risk, returns and liquidity.
OUR EXPERIENCE WITH CORPORATE TREASURIES
More often than not, we have noticed the following common fundamental investment errors while investing corporate funds. Here are some examples and also a glimpse into what we would do differently:
Common Investment Errors
The IME Approach
Asset Allocation
Corporate Goal-Based Allocations
Sub-optimal Goal-based allocation: Every company has different goals and needs – contingency fund, an acquisition fund, a monthly recurring expense fund, funds for specific projects etc. However often, investments are made at an overall corporate treasury level, as compared to investments against specific goals.
Diversification
Liquidity Management
Taxes
Substantial reduction in annual taxes: You can substantially reduce taxes on such investments, by using low-risk debt-type funds for these funding lines instead.
THE IME ASSURANCE
Our corporate treasury solutions can help boost your investment yields, with virtually no incremental risk, while ensuring that all investments are being managed via a board-approved investment mandate that gives clear visibility of the investment book to all key stakeholders.
Our services include
Goal planning with Funding Visibility
Identify your core financial goals and timelines (e.g. monthly recurring expenses, M&A warchests, contingency funds, specific project funding).
Investment Options
Help identify the most suitable investment option for each goal, in order to get the optimal balance between risk, return and liquidity requirements.
Investment Mandate
A board-approvable investment Mandate that details out risk-appetite (MTM volatility, capital risk, liquidity management & other such criteria), approved investment options and core goals to drive future investments.
Dedicated Consultant
The needs of your company will evolve regularly and a dedicated consultant will work on all of the above keeping track of your needs. Also, you will have real time monitoring and advice on portfolio changes by our investment professionals.
Compliance Reporting
Top management / board reporting on compliance, suitability and progress on plans.
The investment plan can be revised at any time, as requirements of the company and market conditions evolve.
Getting Started
1) EARLY CONSULTATION
We are 100% sure about the value we can deliver so we offer a free consultation where we assess your organisation goals, risk appetite and ability (including capital risk, reputation risk). At this step, we also offer an existing analysis of your existing portfolio and its suitability in terms of risks, returns and volatility.
This allows us to invest considerable time & effort on a no-fee, no-commitment basis. Once the consultation is completed, we can then evaluate if there are any specific areas where we can engage with you, to help add value to your portfolio on an on-going basis.
2) INVESTMENT PLAN
After this, we provide a detailed investment plan that includes documenting goals, defining white listed investment options, level of risk at a company and loan level, and actions that can be taken to improve risk return trade off on existing investments.
3) MANAGEMENT / BOARD APPROVAL
We present the investment plan for consensus across the key stake-holders for specific approval. A clearly defined path for investment decisions makes the process more strategic and reduces the chance of conflict or errors.
4) FLEXIBLE ENGAGEMENT MODELS
Based on the corporates requirements, we have the ability to operate across different engagement models, including as a fully-outsourced corporate treasury, a distributor or an advisor.
FAQs
Your CFO / CA specialises in corporate finance, which is a different field altogether from investments. Selecting the right funds (even for low-risk debt funds) requires a careful assessment of the risk-return at a fund level (which includes analysing the individual fund holdings, understanding the trade-off between YTM & risk, the different debt fund categories etc).
Most CFO/CA’s have a lack of time and specific expertise required for a detailed assessment of each funds suitability. This is the main reason why corporate treasuries often end-up with issues around over-diversification and overtly conservative asset allocation).
The actual goals are unique to each and every company. Our advisors will help you identify the goals that are the most relevant for your specific requirements.
However, as an example, these are some of the common goals for corporates that we can help create specific plans for:
- Monthly Overhead fund: invest idle funds in liquid debt funds with automatic redemptions prior to salary/rent payment dates
- Capex planning fund: set aside funds to be used for your next major capex requirements
- Contingency fund: you never know when cash flows can take a sudden hit. Be prepared for such contingencies and avoid being stuck at your bank’s mercy
- Loan repayment fund: set aside money for loan repayments
- Strategic funds: capital set aside to fund strategic growth opportunities (such as new business opportunities & acquisitions)
- Contingent Liability Funds: set aside funds for potential unfavourable rulings on any specific contingent liability (such as tax disputes, court cases etc.)
It is very important to understand, that we are not recommending that you take risk with your corporate funds. Losing money in the markets that limits your ability to fund required corporate projects is the worst thing to happen for any company.
What we are advising however, is moving away from overtly conservative corporate treasuries, that sharply reduces the returns on your funds. Specifically, we recommend:
- Minimising idle funds in current accounts & bank fixed deposits — replacing them with liquid low-risk debt funds instead
- Reducing over-diversification — to reduce the risk associated with investing in low-quality funds in an aim to diversify
- Moving away from liquid — whose returns have got compromised post recent regulatory changes, to liquid + fund categories (such as low-duration, ulta ST funds) which offer similar risk-return as liquid funds
- Consider some medium-risk investment options: specifically for your longer-term investment goals and if you are an unlisted family-run firm that can afford some MTM volatility risk
All corporate’s will already have their fund requirements planned and it may appear that our goal planning offers nothing much incrementally from what you are currently doing. The main benefits of our financial goal planning services for corporates includes:
- Clearly documented goals: with fund requirements, investment horizons and risk-tolerance at a goal level
- Immediate visibility of funding against each goal: with customised reports to provide you complete clarity on how much you have invested against each bucket
- Goal-level investment options: since each goal differs in time-horizons and risk-tolerance, this helps us optimise the selection of funds for each specific goal
While not strictly required (especially for smaller companies), it is recommended that all corporates (big or small) have a clearly defined investment plan that spells out the risk-appetite, core goals and allowed investment options for the corporate treasury. This plan should ideally be approved by the board (or top management), which helps provide clarity for all future investments and helps avoid too much discretion allowed at the finance level.
Investment plans are dynamic, and any desired changes can always be incorporated at a future date.
Since banks wish to push their own product, they will typically first respond in the negative when you ask about replacing bank FDs with debt MFs. However, in our experience, once pushed on the same almost all banks do allow you to substitute bank FD’s with low-risk debt funds.
The benefit to you is the virtual elimination of taxes on investments against your funding lines.
We charge a percentage of the Asset under Advice (AuA). The specific charges are dependent on the portfolio size, level of engagement and other factors. We are confident that our ability to increase risk-adjusted returns on your portfolio, more than make up for our charges.