Goldman’s US head of liquidity solutions: 2018 has been good for treasurers

By Michael McCaw | 6 November 2018

This year has been the best environment for treasurers in the US since the global financial crisis, according to Dave Fishman, managing director and head of liquidity solutions, US, Goldman Sachs.

“[Post-financial crisis] this is the first time that you’ve been able to achieve on cash a return greater than the inflation rate. An actual real rate of return,” he said, at an industry event this week in Chicago. “Cash can now be accrued up to your business rather than thinking about how to decrease the drag.”

“Rates are higher, they’re more interesting and there’s more things to do with your money,” Fishman continued. “We’re two years into the hiking cycle, we’ve got at least a year to go. We had a magical time within the last month which is one year corporate paper at 3%. Realising how long it’s been since we had a 3% - there are many people out there who have never in their careers – people with eight to ten years of experience have never seen them.”

Further, the Federal Reserve’s position has helped the market.

“You’ve got Fed balance sheet run-off. The Fed was essentially the largest buyer of agency securities, agency mortgage backed securities and treasuries for many many years through the quantitative easing program. Now they’ve actually started to flip that bucket. So we’ve got $30m running off per month. That’s basically sucking cash out of the system and lessoning the Fed’s balance sheets – that’s one of the things we’ve got to do.

“We’ve got an relatively flat yield curve and we’ve got an opportunity to do some interesting things. One of those things is the new securities since the financial crisis. We’ve got a two month treasury bill, we’ve got treasury floating rate notes.”

However, the fact that details over the Libor replacement are not yet known, could cause disruption, said Fishman.

“We’ve got this small event on the horizon called Libor reform. It’s something that all of us really rely on for funding mechanisms – it’s so embedded into the financial system and it’s scheduled to go away over the next two years. That’s basically the time that regulators have said ‘that’s when Libor is going away’ but nobody’s actually said what’s on the other side of Libor. That’s going to be something that all of us are going to have to deal with over the next several years. There’s more disruption to come.”

Matthew Skurpe, treasurer and managing director, Blackstone, agreed that this year has been good for money managers. “Right now is probably one of the more interesting times to be managing money in this space in a long time.”

“It’s really nice to have some portfolio yield,” he said. “Trying to manage a safe fixed income portfolio in a time when you have zero rates and you’re still expected to return some money – going back six or seven years ago you’re really trying to earn a return off your assets which is not natural in the fixed income space.”

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