A company’s investment policy is the cornerstone of its investment management activities and should be a living document that is reviewed and updated as needed on an annual basis. In today’s investing environment, what should Treasury teams be thinking about as they conduct this review? Play back the recorded session of our webinar to hear Thomas Metzler, Managing Director with J.P. Morgan's Asset Management Global Liquidity Team, and Phil Mattes, Treasury Strategist with Kyriba Corp., discuss best practices and trends related to corporate investment policies and global liquidity management, as well as: -Characteristics of a strong investment policy -Current trends that might influence an investment policy review -Investment management straight through processing best practices -Financial systems support of investment policy compliance

1. Welcome
to the
Webinar:
2014 Global Liquidity Management Planning
and Investment Policy Review
January 30, 2014
© 2013 Kyriba Corporation. All rights reserved.
PRIVILEGED & CONFIDENTIAL.
0

2. Current landscape
Cash levels
Corporate investment behavior
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3. Corporations are deploying cash, but cash levels are still growing
Corporate Cash as a % of Current Assets
Corporate Growth
S&P 500 companies – cash and cash equivalents, quarterly
$bn, nonfarm nonfinancial capex, quarterly value of deals completed
Equities
30%
$1,600
28%
$1,500
26%
Capital Expenditures
M&A Activity
$1,600
$1,400
$1,200
$1,400
24%
$1,000
$1,300
22%
$800
$1,200
20%
18%
16%
$600
$1,100
$1,000
14%
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
Dividend Payout Ratio
$400
$200
$900
$0
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Cash Returned to Shareholders
$bn, S&P 500 companies, rolling 4-quarter averages
S&P 500 companies, LTM
60%
$33
$30
$160
Dividends per Share
$140
50%
$120
$27
$100
$24
40%
$80
$21
$60
30%
$18
20%
Share Buybacks
$15
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
$40
$20
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Source: Standard & Poor’s, FRB, Bloomberg, FactSet, J.P. Morgan Securities, J.P. Morgan Asset Management. (Top left) Standard & Poor’s,
FactSet, J.P. Morgan Asset Management. (Top right) M&A activity is the quarterly value of deals completed and capital expenditures are for
nonfarm nonfinancial corporate business. (Bottom left) Standard & Poor’s, FactSet, J.P. Morgan Asset Management. (Bottom right) Standard &
Poor’s, Compustat, FactSet, J.P. Morgan Asset Management. ―Guide to the Markets – U.S.‖ Data are as of 9/30/13.
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4. Holdings of cash and short-term investments
Nearly
60%
of organizations hold some amount of their cash outside of the U.S.
The share increases to
75%
for public corporations
Change in cash and short-term investment balances over the past year: U.S. and non-U.S. cash holdings
(Percentage distribution of organizations with cash and short-term investment holdings outside of the U.S.)
Within the U.S.
Outside the U.S.
Much larger (+15%)
11
12
Somewhat larger
26
25
No significant change
43
49
Somewhat smaller
10
9
Much smaller (-15%)
10
5
Source: The 2013 AFP Liquidity Survey,
Association for Financial Professionals
JPMorgan Global Liquidity Investment PeerView
(June 2013)
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5. Liquidity by the numbers
74%
of all cash balances are maintained in banks, money market funds and Treasury securities.
50%
of organizations’ short-term investment balances are held in bank deposits
Out of organizations’ short-term investment portfolios,
80%
65%
matures in 30 days or less
of financial professionals expect the average maturity of their organization’s short-term investment
portfolio to stay the same or shorten further
Among organizations decreasing cash balances
operations, the most common driver of lower
36%
acquired a company or launched new
cash holdings
Among organizations increasing cash balances
common driver of higher cash holdings
54%
generated higher operating cash flow, the most
Source: The 2013 AFP Liquidity Survey, Association for
Financial Professionals
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6. Allocation across cash instruments
Close to a third of cash assets are allocated to money market funds, with usage
highest in Europe and in companies with smaller cash balances
By Region
Total
N. America
50%
29%
35%
Europe
34%
40%
Asia
By Cash Balance
22%
<$500M
$500M - $999M
13% 6%
41%
66%
7%
9%
14%
19%
>$5 B
30%
50%
$1B - $5B
8% 7%
61%
25%
42%
32%
18%
7%
16%
34%
27%
5% 4%
8%
26%
15%
Bank deposits/earnings credit rate – offset to bank fees
Bank deposits/earnings credit rate – offset to bank fees
Money Market
Repos, CDs, commercial paper, corporate bonds
Money Market
Other
Other
Source: JPMorgan Asset Management Global Liquidity
Investment PeerView Study Results June 2013
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Repos, CDs, commercial paper, corporate bonds

7. Strategies with more yield are attracting corporate cash
Money Market Fund
AUM ($)
Managed Reserves &
Short Duration AUM ($)
600,000,000,000
70,000,000,000
JPMorgan Money Market Funds
Managed Reserves & Short Duration
60,000,000,000
500,000,000,000
50,000,000,000
400,000,000,000
40,000,000,000
300,000,000,000
30,000,000,000
200,000,000,000
20,000,000,000
100,000,000,000
10,000,000,000
Chart shown for illustrative and discussion purposes only.
Source: J.P. Morgan Asset Management. Data as of December 31, 2013
Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice
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Dec-13
Jun-13
Sep-13
Mar-13
Dec-12
Jun-12
Sep-12
Mar-12
Dec-11
Jun-11
Sep-11
Mar-11
Dec-10
Jun-10
Sep-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
0
Dec-04
0

8. A disciplined approach for evaluating investment
solutions
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9. Benefits of a well-executed investment policy
With consistency and clarity, an investment policy sets the
strategy for your investment decisions.

Ensures consistent approach in all market conditions

Provides clarity so that everyone understands the policy

Imposes transparency for internal control

Helps you meet your corporate investment goals
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10. Steps toward creating an investment policy
Weighing the risks and rewards for
cash investments — a rigorous,
ongoing, sequential process
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11. Segmenting cash by liquidity need and profile
This is the first step in determining your investment strategy
and ensuring optimal return.
Total balance
sheet cash
Risk profile
Strategic
cash
Restricted
cash
Reserve
cash
Operating
cash
Operating

Cash typically used
for daily operating
needs may
be subject to
unforeseen
volatility

Requires
preservation
of principal

Late-day access

Reserve

Investment horizon
of 6 to 9 months
or longer

Fairly static,
same-day access
not needed
Restricted


Balances trapped
in highly regulated
jurisdictions or with
repatriation-related
tax issues
Cash collateral
tied to credit
agreements or
derivative contracts
Same-day liquidity

Cash set aside for
possible acquisition,
stock buy back
or R&D
The above chart is for illustrative purposes only.
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Strategic

No short-term
forecasted use

Cash on balance
sheet that has not
been historically
used

Investment horizon
of 1 year or longer

12. Assess your tolerance for volatility
Considerations

Do you have any tolerance for volatility?

What is your maximum acceptable realized loss in a given period?

Should you have any restrictions on gains?

What data will you need to assess potential volatility in an investment strategy?

What is an appropriate impairment policy?
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13. Assess whether to extend maturity both at the security
and portfolio level
Considerations

Does the yield curve merit longer-term investment?

What proportion of the portfolio should you allocate to different maturities, given your
liquidity requirements?

What should be the maximum duration for the overall portfolio?

What will be the agreed course of action if immediate liquidity requirements cannot be
met?
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14. Investors with longer horizon can, over time, pick up higher returns by
extending maturities
All data as of December 31, 2013
BofA Merrill Lynch US 3-Month
Treasury Bill
Total rate of return (%)
1 Year
3 Years
5 Years
10 Years
StDev*
Total rate of return (%)
0.07
0.10
0.12
1.68
0.56
Frequency of negative returns
(rolling)
1 Month
3 Months
1 Year
Avg 1M Negative Return (%)
Avg 3M Negative Return (%)
Avg 1Y Negative Return (%)
3 Months
6 Months
1 Year
2 Years
3 Years
5 Years
10 Years
1 Year
3 Years
5 Years
10 Years
StDev*
5.00%
2.50%
0.00%
(0.00)
(0.00)
-
0.18
0.21
0.31
1.97
0.63
1 Month
3 Months
1 Year
Avg 1M Negative Return (%)
Avg 3M Negative Return (%)
Avg 1Y Negative Return (%)
Average
Best
Period
0.00
0.00
0.05
0.08
0.10
0.12
1.68
0.42
0.85
1.74
1.80
1.91
2.32
2.76
1.34
2.70
5.29
5.03
4.42
3.60
3.81
3 Months
6 Months
1 Year
2 Years
3 Years
5 Years
10 Years
Total rate of return (%)
1 Year
3 Years
5 Years
10 Years
StDev*
0.26
0.35
0.54
2.07
0.80
1 Year
3 Years
5 Years
10 Years
StDev*
0.36
0.78
1.09
2.56
1.40
Frequency of negative returns
(rolling)
3.33%
0.00%
0.00%
(0.01)
-
Benchmark returns, % (rolling)
Worst
BofA Merrill Lynch 1-3 Yr
US Treasuries
BofA Merrill Lynch 1-Year
US Treasury Note
Total rate of return (%)
Frequency of negative returns
(rolling)
Benchmark returns,% (rolling)
Period
BofA Merrill Lynch US 6-Month
Treasury Bill
Frequency of negative returns (rolling)
1 Month
3 Months
1 Year
Avg 1M Negative Return (%)
Avg 3M Negative Return (%)
Avg 1Y Negative Return (%)
1 Month
3 Months
1 Year
Avg 1M Negative Return (%)
Avg 3M Negative Return (%)
Avg 1Y Negative Return (%)
17.50%
5.00%
0.00%
(0.06)
(0.11)
-
Benchmark returns, % (rolling)
Benchmark returns, % (rolling)
Worst
Average
Best
0.00
0.04
0.14
0.17
0.21
0.31
1.97
0.49
1.00
2.04
2.11
2.24
2.67
3.08
1.82
3.40
6.08
5.50
4.79
3.90
4.03
Period
3 Months
6 Months
1 Year
2 Years
3 Years
5 Years
10 Years
26.67%
16.67%
1.67%
(0.21)
(0.28)
(0.19)
Worst
Average
Best
Period
Worst
Average
Best
-0.30
0.04
0.22
0.25
0.35
0.54
2.07
0.52
1.05
2.14
2.24
2.41
2.93
3.34
2.52
4.15
6.91
5.84
5.00
4.64
4.34
3 Months
6 Months
1 Year
2 Years
3 Years
5 Years
10 Years
-1.06
-0.33
-0.35
0.28
0.67
1.09
2.56
0.65
1.31
2.66
2.83
3.06
3.61
3.96
3.75
5.95
9.16
6.98
5.95
5.53
4.93
Source: BofA Merrill Lynch. Above data is based on 120 monthly observations. Returns for periods of 1 year or longer are annualized. * Annualized standard deviation of monthly
returns on a trailing 10-year basis. Charts are shown for illustrative purposes only. All data as of December 31, 2013.
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15. Assess whether greater credit risk is acceptable
Considerations

Besides using agency ratings, how will you assess and monitor credit quality of potential
investments/issuers?

Do you have the ability and resources in-house to assess credit quality or should you
outsource?

What will be your guidelines for credit allocation?

How often will you review credit quality and your credit risk exposures?

What is the agreed course of action if a security or issuer is downgraded, put on watch or
falls below your minimum credit quality standards?

Consider also how you expect to be notified of a downgrade event or threat in a timely way.
Is this information
that can be captured in-house or tasked to a third party?
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16. Risk Return Profiles for 1-3 Corporate Only Indices
All data as of December 31, 2013
BofA Merrill Lynch 1-3 Yr
AAA US Corporate
BofA Merrill Lynch 1-3 Yr
AA US Corporate
Total rate of return (%)
BofA Merrill Lynch 1-3 Yr
Single-A US Corporate
Total rate of return (%)
1 Year
3 Years
5 Years
10 Years
StDev*
0.87
1.53
2.72
3.23
2.05
BofA Merrill Lynch 1-3 Yr
BBB US Corporate
Total rate of return (%)
1 Year
3 Years
5 Years
10 Years
StDev*
1.06
1.81
3.45
3.29
2.02
Total rate of return (%)
1 Year
3 Years
5 Years
10 Years
StDev*
1.54
2.56
5.04
3.30
3.56
1 Year
3 Years
5 Years
10 Years
StDev*
2.47
3.40
7.29
4.64
3.26
Frequency of negative returns
(rolling)
Frequency of negative returns
(rolling)
Frequency of negative returns
(rolling)
Frequency of negative returns
(rolling)
1 Month
3 Months
1 Year
Avg 1M Negative Return (%)
Avg 3M Negative Return (%)
Avg 1Y Negative Return (%)
1 Month
3 Months
1 Year
Avg 1M Negative Return (%)
Avg 3M Negative Return (%)
Avg 1Y Negative Return (%)
1 Month
3 Months
1 Year
Avg 1M Negative Return (%)
Avg 3M Negative Return (%)
Avg 1Y Negative Return (%)
1 Month
3 Months
1 Year
Avg 1M Negative Return (%)
Avg 3M Negative Return (%)
Avg 1Y Negative Return (%)
27.50%
16.67%
0.83%
(0.33)
(0.62)
(0.43)
Benchmark returns, % (rolling)
25.00%
18.33%
1.67%
(0.39)
(0.60)
(0.48)
Benchmark returns, % (rolling)
24.17%
15.00%
8.33%
(0.69)
(1.82)
(5.07)
Benchmark returns, % (rolling)
Period
Worst
Average
Best
Period
Worst
Average
Best
3 Months
6 Months
1 Year
2 Years
3 Years
5 Years
10 Years
-2.43
-2.19
-0.43
0.88
1.42
2.72
3.22
0.81
1.63
3.33
3.55
3.80
4.33
4.63
4.30
5.76
8.78
7.05
6.20
6.56
5.53
3 Months
6 Months
1 Year
2 Years
3 Years
5 Years
10 Years
-2.96
-2.43
-0.73
1.23
1.64
2.70
3.27
0.83
1.66
3.39
3.57
3.80
4.32
4.63
4.74
7.27
10.51
7.59
6.31
6.70
5.57
Period
3 Months
6 Months
1 Year
2 Years
3 Years
5 Years
10 Years
20.83%
15.83%
5.00%
(0.59)
(1.29)
(3.35)
Benchmark returns, % (rolling)
Worst
Average
Best
-10.22
-10.27
-8.05
-1.58
0.48
0.98
3.26
0.85
1.70
3.46
3.61
3.79
4.18
4.50
7.34
11.32
16.90
11.03
7.79
6.72
5.62
Period
3 Months
6 Months
1 Year
2 Years
3 Years
5 Years
10 Years
Worst
Average
Best
-7.48
-7.19
-5.04
-0.25
1.38
1.78
3.99
1.17
2.37
4.90
5.09
5.17
5.29
5.24
9.51
15.08
23.11
14.77
10.42
7.74
6.01
Source: BofA Merrill Lynch. Above data is based on 120 monthly observations. Returns for periods of 1 year or longer are annualized. * Annualized standard deviation of monthly
returns on a trailing 10-year basis. Charts are shown for illustrative purposes only. All data as of December 31, 2013.
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17. Decide how your investment strategy will be executed
Considerations
Local
Regional
Global
In-house
Do you want to use in-house
resources or outsource?

Held to maturity
Do you want an investment strategy
imposed and managed
locally, regionally or globally?

What will be the process and criteria
for selecting and monitoring thirdparty providers?

Yield
versus
total return

What type of metrics and reports will
be required and how frequently?
Available for sale
Outsource
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16

18. Instituting an Investment Policy
1. Consider cash segmentation
2. Create a governance framework
3. Establish investment parameters, including objectives, benchmarks and
scope
4. Determine permissible investments
5. Define characteristics of investments, such as credit rating and
diversification by security type
6. Monitor investments
7. Ensure compliance with rigorous due diligence
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19. Conclusion
The ―right‖ investment policy can vary significantly from one
organization to another, depending on these factors:
Treasury
resources
Cash flows
Liquidity
requirement
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Comfort level

20. J.P. Morgan Asset Management
NOT FOR RETAIL DISTRIBUTION: This communication has been prepared exclusively for Institutional/Wholesale Investors as well as Professional
Clients as defined by local laws and regulation.
The opinions, estimates, forecasts, and statements of financial markets expressed are those held by J.P. Morgan Asset Management at the time of going to print
and are subject to change. Reliance upon information in this material is at the sole discretion of the recipient. Any research in this document has been obtained and
may have been acted upon by J.P. Morgan Asset Management for its own purpose. References to specific securities, asset classes and financial markets are for
illustrative purposes only and are not intended to be, and should not be interpreted as advice or a recommendation relating to the buying or selling of investments.
Furthermore, this material does not contain sufficient information to support an investment decision and the recipient should ensure that all relevant information is
obtained before making any investment. Forecasts contained herein are for illustrative purposes, may be based upon proprietary research and are developed
through analysis of historical public data.
There can be no assurance that the professionals currently employed by JPMAM will continue to be employed by JPMAM or that the past performance or success
of any such professional serves as an indicator of such professional’s future performance or success.
J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication
issued in the United States by J.P. Morgan Investment Management Inc., JPMorgan Distribution Services Inc., and J.P. Morgan Institutional Investments, Inc.
member FINRA/ SIPC.
© 2014 JPMorgan Chase & Co.

21. Investment Management STP

22. Investment Management STP
Transaction Capture
• Investment details are only
input once and then flow into
various the various financial
systems
Capture
• Options: interfaces from
investment portals, exports
from bank systems, manual
upload, manual input
• Benefits:
• Reduced errors
• Increased efficiency
© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.
21

23. Investment Management STP
Liquidity Position
Liquidity
Position
Capture
• Financial systems have flexible
reporting options and are able
to consolidate investment
balances with bank balances
and borrowing information into
one overall position report
• Future dated investment
related cash flows
automatically appear in the
cash forecast
• Benefits:
• Increased efficiency
• Enhanced decision making
abilities
© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.
22

24. Investment Management STP
Integrated Payments
Payments
Liquidity
Position
Capture
© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.
• Investment related payments
are automatically generating
based on investment details
• Default payment details
associated with each
counterparty and investment
type
• Multiple options for payment
notification and approval
workflow
23

25. Investment Management STP
Accounting
Accounting
Payments
• Financial systems automatically
generate investment
accounting entries (including
accruals) across multiple
general ledger systems and
multiple charts of accounts.
Liquidity
Position
• Accounting entries generated
at any frequency required
(daily, weekly, monthly)
Capture
• Benefits:
• Reduced errors
• Increased efficiency
• Timely update of GL
systems
© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.
24

26. Investment Policy Compliance Support

27. Investment Policy Compliance Support
•
System enforced approvals based on delegation of authority
limits or other policy considerations
•
Configuration of only approved investment types
•
Notifications if maximum approved transaction amount and/or
maturity exceeded
•
Attachment of supporting documents to the investment
transaction
•
Ability to capture counterparty credit ratings
•
Flexible counterparty reporting including ability to consolidate
investment positions with bank account balances
© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.
26

28. Additional Resources
Kyriba white paper:
Treasury Mandate - A Strategic Partner for
Unlocking Business Value
http://kyri.ba/19sqt0R
J.P. Morgan Global Liquidity PeerView
survey report
http://goo.gl/Bl81Fa
© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.
27

29. Contact Kyriba
kyriba.com/blog
twitter.com/kyribacorp
linkedin.com/company/kyriba-corporation
facebook.com/kyribacorp
slideshare.com/kyriba
youtube.com/kyribacorp
© 2014 Kyriba Corporation. All rights reserved. PRIVILEGED & CONFIDENTIAL.
28