Context: A recent survey by NeuGroup for Cash Investments revealed that members of the group use an average of 4.6 outside investment advisors or asset managers. On one end of the spectrum are two companies that each have one advisor managing excess cash. On the other end is a member with 11 asset managers. - The more investment advisors a treasury team has, the more potential pain points it confronts, including time-consuming know-your-customer (KYC) processes. Legal tussles between the corporate and the manager over documents can also delay how quickly a new manager of separately managed accounts (SMAs) is added.
- NeuGroup members over the years have compared notes on how best to manage SMA managers, as documented in a previous article that emphasized the importance and value of clear and open communication. One member said relationships with portfolio managers and the intelligence they provide are the biggest benefits of SMAs.
- Another noted that advisors have different styles and recommended using more than one investment manager for a single mandate to better understand differences and recognize what works best.
Member question: “We’re evaluating whether engaging a second investment advisor could offer meaningful diversification benefits—despite being satisfied with our existing provider. We recognize that adding another advisor may introduce some operational complexities (the effort required to ‘manage the managers’—including performance monitoring and reporting, regular strategy and performance discussions, fee negotiations, and handling KYC and legal documentation.) With that in mind, we’re keen to learn:
- “Is anyone currently working with more than one investment advisor?
- “If so, what criteria guided the decision to bring on an additional advisor (e.g., total investable assets, need to compare performance, others)?
- “Have the benefits justified the additional costs and effort?”
Peer answer 1: “We work with five different investment advisors. Two of our portfolios are relatively small and are EUR and DKK based. The other three are in USD. The use of so many different managers is due to: diversification and different duration targets across the different portfolios as we segment our cash; and to provide business to different banks in our revolving credit facility.
- “It is also, I suppose, partly due to the size of our cash and marketable securities position, which is several billion dollars, but less than last year.”
Peer answer 2: “We work with five different managers. All of our managers have the same mandate, so for us it’s for diversification and share of wallet reasons mentioned above.
- “Related to diversification, I worry about something that I call philosophy risk. That is, managers and/or their firms may have different views on, for example, timing of Fed moves or outlooks of certain industries; these types of differences may impact the duration of the investments and the specific names that they invest in.
- “You should try and standardize your pricing structure across managers (easier to manage when the bills come in) and include tiered pricing so that you don’t need to go back each time your portfolio grows.
- “Also, we do limit investments per manager as a percent of their assets under management (looking at, for example, AUM related to separately managed accounts for corporates) so that we don’t become too much of their total AUM.”
Peer answer 3: “We have three advisors, each managing around $200 million to $300 million. They’re all working with the same investment policy; but we have a slightly different mandate for one of the managers and there are natural differences between the three.
- “I’m sure I could have one manager cover the entire portfolio, but I like the diversity of opinion/people/approach. I would like to keep the same three as liquidity builds and not feel compelled to add a fourth unless bank share of wallet pushed me to do so.”
Peer answer 4: “We have one investment consultant covering our large U.S. domestic 401(k) plan. We don’t use a consultant to advise on cash investment/deposits policy/strategy, etc. but we do balance between:
- “Corporate credit portfolio (one manager, also at one of our tier 1 joint lead arranger banks).
- “Government money market funds (JPM liquidity Mgmt. platform).
“At a previous company, we had different investment consultants across our international pension plans (primarily Aon globally but also Mercer and a few others in selected EMEA countries). We also used another consultant for our corporate foundation.
- “So I’d say yes to multiple advisors, but typically differentiated towards different plans/investment mandates (DB/DC/foundation/corporate cash liquidity/investments, etc.).”
Peer answer 5: “We work with five managers. Benefits certainly outweigh cost given the size of our cash balance. Certain managers excel at asset classes and parts of the curve. By adding different asset classes than the traditional benchmarks, you will get additional alpha.
- “In addition, you get a diversification of thought; but sometimes the managers will own the same bond, so you may be increasing exposure unknowingly. I think the other complexity is that you will need to make sure at the aggregate level you are in compliance with your investment policy statement.
- “Key considerations: Does your current investment manager self-custody? If so, you may need to partner with another custodian for a new manager. Having two can be complex. Will you use Clearwater to aggregate if you need multiple custodians?”
Member conclusions. “After receiving multiple responses and speaking with a few NeuGroup colleagues, I concluded that adopting multiple investment managers can be a valuable strategy—though its effectiveness depends heavily on context and scale.
- “The feedback reflects broad consensus that engaging multiple investment advisors offers beneficial diversity of views, particularly on economic outlooks and portfolio management approaches. In most cases, the key drivers for introducing a second advisor include enhancing strategic share of wallet following debt issuance and meeting diversification goals.
- “Some potential challenges were also raised. A few colleagues noted that investment managers may provide limited attention unless the AUM reaches a meaningful threshold. Additionally, performance comparison is critical, with most companies leveraging Clearwater to calculate performance ratios.
- “The companies that shared feedback typically manage at least $1.6B in cash and marketable securities. We have much less. We also lack a dedicated system for calculating performance metrics—relying instead on manual Excel-based analysis. This limitation would add operational complexity to managing multiple investment relationships.
- “Given these factors, we’ve decided to revisit the possibility of engaging a second advisor at a later stage, once the company has reached greater scale and maturity.”
