Federated Hermes Enters Conservative Ultra-Short BF Market; ICD; CAG

Federated Hermes is the latest firm to enter the “Conservative” Ultra-Short Bond Fund space, we learned from a press release entitled, “Federated Hermes, Inc. Launches Two New Microshort Funds.” The release explains, “Federated Hermes … announced the launch of Federated Hermes Conservative Microshort Fund and Federated Hermes Conservative Municipal Microshort Fund. The actively managed funds offer an innovative approach to liquidity management by pursuing higher yields than money market strategies while simultaneously aiming to maintain lower NAV volatility by investing in securities with shorter maturities than traditional ultrashort products.” (Note: Watch for more on Conservative Ultra-Short Bond Funds in our next issue of Bond Fund Intelligence, and at our next virtual event, Crane’s Bond Fund Symposium, which will be held online March 25-26, 2021.)

It continues, “Federated Hermes Conservative Microshort Fund seeks to provide current income with capital preservation while maintaining liquidity. Federated Hermes Conservative Municipal Microshort Fund seeks to provide current income on a tax-exempt basis and preservation of capital with an emphasis on maintaining liquidity.”

Federated Advisory Companies President & CEO John Fisher comments, “As our clients seek yield advantage while rates remain historically low, our new microshort funds extend our range of customized liquidity-management offerings at the short end of the yield curve…. The cross-team management, a mainstay of Federated Hermes’ collaborative culture, taps the knowledge and unwavering client focus of our experienced professionals to optimize investment choices across liquidity and fixed-income universes.”

Federated tells us, “As complements to money market and short-term allocations, the new microshort funds are jointly managed by Federated Hermes’ liquidity and fixed-income teams. Each member of the team brings 20 to 40 years of investment experience and incorporates insights from fundamental factors, rigorous analysis and our proprietary ESG dashboard.”

They add, “Key portfolio managers of the Conservative Microshort Fund include Randall S. Bauer, senior portfolio manager, head of low-duration strategies; Paige Wilhelm, senior portfolio manager and head of prime liquidity group; Nicholas Tripodes, portfolio manager and senior investment analyst; and Mark Weiss, senior portfolio manager. Key portfolio managers of the Conservative Municipal Microshort Fund are Mary Jo Ochson, chief investment officer and head of the tax-free liquidity investment area and short-term municipal bonds; Kyle Stewart, senior portfolio manager and senior investment analyst; and Patrick Strollo, senior portfolio manager and senior investment analyst.”

For more on Ultra-Short Bond Funds, see these Crane Data News pieces: “Vanguard Launching Ultra-Short Bond ETF; Weekly MF Portfolio Holdings” (1/21/21); “Dec. Bond Fund Intelligence: Bond Funds Break $5 Tril; European BFs” (12/14/20); Wells Podcast on Increasing Yield (12/10/20); “Bond Fund Webinar Recap: Junker, Roever, Walczak Talk Ultra-Shorts” (10/5/20); and “Morgan Stanley’s Buck Says Corps Going Beyond MMFs on TMANY Webinar” (9/21/20).

In other news, a release entitled, “ICD Portal Named Best Investment Management Solution” tells us, “The treasury industry has recognized ICD’s independent portal for money market funds and other short-term investments as the Best Investment Management Solution in this year’s Global Finance awards for Best Treasury and Cash Management Banks and Providers. Winners were chosen from across 75 countries and territories.”

ICD CEO Tory Hazard comments, “We’re thrilled to be recognized by the broad community of participants in the treasury industry…. Treasury’s ability to move easily in and out of funds and at the right time is in no small part aided by the kind of independent portal technology and high-touch service ICD offers, which is especially important in times of market stress like we’ve seen during this pandemic.”

The release continues, “Throughout the pandemic, ICD’s data against the industry benchmark indicates that investors using ICD Portal act more quickly than the rest of the market to de-risk portfolios and find opportunities in short-term investments. ICD has added number of investment products in recent months that allow organizations to find yield while still offering same-day liquidity in a near-zero rate environment.”

Global Finance’s Joseph Giarraputo says, “Smart management of cash and treasury systems were essential over the past year of pandemic-induced chaos…. Our awards pinpoint the financial entities that shepherded their clients through the crisis with real-time insights and strategies that worked even at a time of rapid and dramatic changes.” It adds, “To determine winners of the awards, Global Finance used a multi-tiered assessment process, which included input from industry analysts, corporate executives, technology experts and independent research.”

Finally, Capital Advisors Group published “Vaccines, ESG and LIBOR Replacement – Three Themes to Watch in 2021.” They write, “At the start of each year, we typically name three broad themes that we think will have the greatest potential impact on the short-term debt markets. Our 2020 picks posed three questions: a) Would the Fed give in to the market’s expectation of further rate cuts? b) When and how would the repo market return to normal? c) And was ESG investing in cash management a fad? As it turned out, the biggest factor that dominated everything else in 2020 was the Covid-19 pandemic that dramatically changed the ways we live, work, and interact, if not invest.”

The update continues, “As we look towards 2021, a consensus emerges that, beyond a tumultuous 2020 and a long dark winter, a bright future awaits us as individuals and as an economy. Yet, global central banks’ commitment to continued monetary policy assistance could mean historically low interest rates for longer and more risk-taking behaviors on assets, both of which can be challenging for cash investors.”

CAG’s Lance Pan explains, “Of these contrasting outlooks, we offer our three picks of the trends to watch in 2021 that may shape cash investment strategies: a) a path of recovery dependent on successful vaccine rollouts; b) ESG investing going mainstream; and c) SOFR replacing LIBOR as the benchmark for floating rate debt issuance.”

On ESG, he states, “For institutional liquidity investments, assets managers continue to find ways to meet investor preferences for sustainability by introducing various ESG strategies such as ‘green’ and ‘impact’ funds. While unique challenges for cash portfolios exist, as we recently highlighted, we believe a long-term trend is well under way to rotate out of certain industries into sustainable investments, to increase issuance of green and social bonds, and to apply pressure on financial issuers to demonstrate their commitment to ESG initiatives in lending and market-making activities. As 2020 demonstrated, sustainable investing may bring the direct benefits of reduced volatility and lower credit risk in addition to doing good for the planet and society.”

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