What is Active Treasury Management?

Many asset managers consider treasury part of their operations unit and manage this function through manual, spreadsheet-oriented processes and support staff. Forward-looking asset managers, however, have recognized the importance of treasury, not only in reducing operational risks and protecting assets but also in generating significant potential alpha — sometimes referred to as “treasury P&L”.

These firms have moved treasury to report to their front office and have made significant investments to streamline and automate this function. Some organizations actively managing their treasury function have benefited from:

  • Lower counterparty risk exposure
  • Tighter operational controls
  • Increased operational efficiencies
  • Enhanced incremental return on assets

How Is Treasury Achieving This Alpha Generation?

At the simplest level, these asset managers are locating inefficiently allocated cash and collateral, either sitting idle or otherwise not being used optimally, and putting those balances to their best possible use to yield additional revenue.

Hazeltree has conducted a survey of more than 80 of the world’s leading hedge fund managers (with AUM ranging from $2B to over $50B).*

Based on its findings, Hazeltree has determined that most organizations are focused on treasury management to capitalize on the below benefits, in the following order:

1. Reducing counterparty risk exposure with improved liquidity profiles

2. Improving operational efficiencies with greater controls

3. Adding an incremental 30-100 basis points return on their assets**

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