The Securities and Exchange Commission recently voted unanimously to propose rules - variable NAV, etc. - to reform the way that money market funds operate in order to make them less susceptible to runs that could harm investors. This has prompted a continued search for alternative investments. Particular interest has been on separate accounts.

Although some may have viewed SMAs as a short-lived phenomenon, they offer benefits like additional yield, better diversification, more transparency and greater control. They are used in North America today with, according to the AFP 2013 Liquidity Management survey, 3% of the short-term assets of the companies surveyed are held in SMAs, unchanged from the level reported in last year's AFP survey.

The excellent article in TREASURY & RISK 'Separate Accounts For Short-Term Investing?' found some enthusiasm for SMAs, but one New York-based investment management firm felt that although there would be some money leaving mutual funds for separate accounts, it would be, "Not a flood, but a trickle." The shift having more to do with companies' interest in moving out the yield curve.

One global bank's view is that the operational cash requirements of large companies which need significant liquidity (often daily) and capital preservation would have a 'hard time' moving away from the types of structure offered today in the bank deposit products and money market funds. The main reasons are that the SMAs will not offer enough liquidity for 100% of operational cash. Nor will the SMAs offer the flexibility of their time deposits in many different currencies and locations world-wide, or the wide range of different types of investment opportunities offered by their range of money market funds .

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At best SMAs will be a marginal investment product.