For clients with excess surplus balances and possibly higher levels of deposits than they are comfortable leaving on a bank's balance sheet.
The corporate banker needs to think of alternative solutions.
The bank's asset management division is typically the solution offered.
Corporates interested in asset management solutions are usually very cash rich, so tend to be in either the multinational corporate or the financial institutions group.
So what is asset management? Asset management is when a corporate client asks the bank to invest its excess cash balances on its behalf.
This task is then outsourced to the bank's asset management division, who are the experts in doing this.
These funds will need to be invested in line with the client's treasury policy, which may result in the asset management division, placing cash on deposit with other banks if the client only wishes to invest in short-term cash products, but has limits on how much can be deposited with one banking institution.
The aim here is to earn higher returns than just interest on cash, but this does normally require taking on more risk.
The corporate client will need to provide details on their risk tolerance.
This may come from the company's treasury policy and could include minimum credit ratings for fixed income securities, liquidity needs, how much cash the business might need to bring back into the business at any given time and time horizon.
The duration for which the asset manager will be entrusted with the excess cash asset management spans four main asset classes, equity, fixed income, cash and alternatives.
However, most corporates are primarily interested in the cash classification.
This involves investing in short dated money market products such as treasury bills, and commercial paper.
The risk and return profiles of which most closely match that, of having money in the bank.
