Mason Investment Advisory Services hosted Federated Hermes for a lively discussion about liquidity management in a period of volatile rates and uncertain Federal Reserve activity at the short end of the yield curve.
The session is the latest in a series of Mason educational events designed to highlight critical determinants in the construction and monitoring of client portfolios.
Federated Hermes has been a leader in money market and short-term fixed income investing since 1974. Today the firm manages over $560 billion in money market funds and another $95 billion in fixed income strategies as of 12/31/2023.
Our special guests for the session included two seasoned veterans, each with over 25 years in the business: Deborah Cunningham, Chief Investment Officer for Global Liquidity Markets and Jeff Kozemchak, Senior Portfolio Manager responsible for portfolio management and research in the fixed-income area concentrating on municipal liquidity, ultra-short and short-intermediate maturity securities.
Ms. Cunningham opened the session with an overview of Federated’s outlook for short-term investments, consideration of whether the time was right for an extension in duration, and a promise to review the impact of government rule changes on the management of money market funds.
In the process, she provided insight into Federated’s focus on credit, portfolio management, and trading in fund management. She drew special attention to the firm’s newly created Short-Term Investments Committee, a body of Federated Hermes investment professionals that meets monthly to provide insights, strategize, and discuss investment opportunities at the short end of the yield curve.
The discussion quickly turned to ultrashort funds as a consideration for long-term strategically allocated portfolios. Mr. Kozemchak explained his team’s approach to duration management and volatility targets as well as the credit quality constraints and credit sector allocation governing their securities selection.
He also reviewed the potential advantages of investing in municipal bonds for tax-free income.
The conclusion was an argument for considering ultrashort funds as a potentially higher yielding but relatively liquid sleeve in a diversified portfolio with a long-term time frame and some tolerance for principal fluctuation.
By the end of the lively 90-minute session, participants generally agreed that the discussion improved their understanding of liquidity management at Federated and the options available for liquidity sleeves for clients’ portfolios from Money Markets and up the yield curve to Ultrashort and Low Duration funds.
Is your investment strategy built to realize your long-term investment goals? Call 703-716-6000 or email info@masoncompanies.com to speak with a Mason advisor today.
Disclosures
Past performance is not indicative of future results. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person.
Ultra-short bond funds are not “money market” mutual funds. Some money market mutual funds attempt to maintain a stable net asset value through compliance with relevant Securities and Exchange Commission (SEC) rules. Ultra-short funds are not governed by those rules, and their shares will fluctuate in value. Ultra-short bond funds pursue strategies aimed at producing higher yields by investing in securities with higher risks. Money market funds are also subject to strict diversification and maturity standards that don’t apply to ultra-short bond funds.
Yield Curve: Graph showing the comparative yields of securities in a particular class according to maturity. Securities on the long end of the yield curve have longer maturities.
Bond prices are sensitive to changes in interest rates, and a rise in interest rates can cause a decline in their prices.
Interest income from municipal bonds may be subject to the federal alternative minimum tax (AMT) for individuals, and state and local taxes.
Federated Hermes is not affiliated with Mason Investment Advisory Services.
