Alternatives & Best Practices rm Era. Jason Owen Vice President, ICD

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1 Institutional Inves stment Alternatives & Best Practices in the Post Refor rm Era Jason Owen Vice President, ICD

2 Institutional Investor Objectives 2% 30% 68% Source: The 2016 AFP Liquidity Survey

3 Treasury Investment Attributes Prime MMF Treasury MMF T-Bills/ Repo Bank DDA Ultra-Short BFs Direct CP SMAs In-House Mgmt Relative yield x x x x x Daily liquidity x x x Ultra-low risk x x x Low minimum transaction size x x Low fees x x x x x x x x x x x x x x Diversification x x x x Convenience x x TMS connectivity x x x Portfolio accounting x x Professional management x x x x x x x x x x Source: Treasury Strategies

4 Treasury Investment Utility Treasury Strategies Prior to the post-crisis regulations (Dodd-Frank, Basel III, MMF Reform) Prime money funds Treasury/government MMFs Treasury bills direct Bank demand deposits Ultra-short bond funds Commercial paper direct SMAs Internally-managed portfolios Max = 100

5 Treasury Investment Utility Treasury Strategies After the post-crisis regulations (Dodd-Frank, Basel III, MMF Reform) Prime money funds Treasury/government MMFs Treasury bills direct Bank demand deposits Ultra-short bond funds Commercial paper direct SMAs Treasury Strategies estimate Internally-managed portfolios Max = 100

6 Average Portfolio of Assets (over $1B in revenue) Current Percentage of Short-Term Portfolio Allocated to Specific Investment Vehicles Investment Vehicle Change Bank type investments (CDs, Time Deposits, etc) 51% 50% -1% Prime/Diversified MMFs Government/Treasury MMFs Commercial Paper Agency Securities Eurodollar Deposits Agency Securities Separately Managed Accounts Repurchase Agreements Asset-Backed Securities Municipal Securities Ultra Short Bond Funds Municipal/Tax-Exempt MMFs Other 12% 12% 0 8% 10% +2% 5% 6% +1% 3% 3% 0 3% 3% 0 3% 3% 0 3% 3% 0 2% 1% -1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 0% -1% 5% 4% -1% Source: The 2015 and 2016 AFP Liquidity Surveys

7 2017 ICD Client Survey Results U.S. Clients Investment Vehicle Invested Government MMFs 66% Prime MMFs 47% Federally Insured Cash Accounts (FICA) 9% Federally Insured Brokered CDs 5% Short Duration Bond Funds 7% Separately Managed Accounts 7% Time Deposits Commercial Paper U.S. Agency Discount Notes Certificated of Deposit Repurchase Agreements U.S. Treasuries U.S. Agency Securities Extremely Interested Somewhat Interested Slightly Interested Not Interested 11% 9% 11% 4% 9% 13% 11% 20% 9% 16% 14% 52% 5% 18% 18% 54% 7% 27% 20% 39% 2% 7% 20% 64% 5% 37% 21% 37% 2% 29% 27% 42% 2% 12% 17% 69% 0% 25% 20% 55% 2% 16% 24% 58% 9% 27% 18% 46% 8% 13% 21% 58% Source: The 2017 ICD Client Survey

8 MMFS vs Bank Deposits

9 VNAV Performance 7-day average net yield as of offered via ICD VNAV Prime Rated MMFs via ICD: Govt/Treasury/Repo MMFs via ICD: 0.75% 0.42% 0.14% (09/30/2016) 0.33% Performance Premium for VNAV Prime Rated (03/03/2017) Past performance is not a guarantee of future results

10 Prime Vs Government MMFs BUY AND HOLD Assume a $100M investment in each fund on October 13, 2016, the day before MMF Reform effective date The investment is held to February 8, 2017 The Prime MMFs would have earned double that of the Government Funds Fidelity Fund Comparison Blackrock Fund Comparison Fund companies not affiliated with ICD. Past performance is not a guarantee of future results.

11 Prime Vs Government MMFs ACTIVE TRADER We created an active trader scenario as most treasury departments are not Buy and Hold investors We started with $100M on October 13, 2016 and entered purchases and redemptions over the next four months based on the net inflows and outflows of the respective Prime MMFs Again, the Prime MMFs would have earned double that of the Government Funds Fidelity Fund Comparison Blackrock Fund Comparison ADB: $97,484,079 ADB: $107,307,994 Fund companies not affiliated with ICD. Past performance is not a guarantee of future results.

12 Simplified Tax Accounting Method On July 8, 2016, the Internal Revenue Service (IRS) issued final regulations permitting the simplified Net Asset Value, or NAV, method of accounting for gains and losses in MMFs (IRS Regulation T.D. 9774), and provided d guidance regarding requirements for information reporting via Form 1099-B. KEY CLIENT TAKEAWAYS Final regulations were issued by the IRS, detailing new rules for shareholders in MMFs Clients may elect to use the NAV method as a simplified method of MMF shares Relief from the wash sale rule helps maintain the utility of MMFs as a liquidity vehicle MMFs will continue to be treated as cash eq quivalents Collectively, these rules simplify the effects of the SEC s changes to Rule 2a-7 from a tax accounting perspective Source: blackrock.com/cash

13 Gain-Loss Report

14 Prime MMF Analytics - Best Practices

15 Prime MMF Analytics FIDXX TMPXX

16 Prime MMF Analytics FIDXX TMPXX

17 Prime MMF Analytics FIDXX TMPXX

18 Prime MMF Analytics FIDXX TMPXX

19 Best Practices - Trading and Risk Management

20 Best Practices - Trading and Risk Management Details

21 Best Practices - Trading and Risk Management

22 Best Practices - Trading and Risk Management

23 Best Practices - Trading and Risk Management

24 Best Practices - Trading and Risk Management

25 Best Practices - Trading and Risk Management

26 Best Practices - Trading and Risk Management

27 Best Practices - Trading and Risk Management

28 ~ ICD Roadshow - Los Angeles, Terranea Oceanfront Resort May 12 2 th ~ AFP 2017 in San Diego October 15 th 18 th

29 Institutional Inves stment Alternatives & Best Practices in the Post Refor rm Era Jason Owen Vice President, ICD Thank you!