Much of the rhetoric in recent months has been focused around a faltering global economic recovery and concerns over a possible double-dip recession. Whether we are still in a recessionary period or heading into another one is up for debate, but the fact remains that there are still many headwinds that face the economy. What this means for corporate cash investors is that it will remain difficult to generate value by sitting on the sidelines. Money market mutual funds have been yielding zero or near-zero for years and many prime money fund providers have been prudent in scaling back on European banking exposure given the sovereign debt crisis, making it even more challenging for these funds to generate return. In spite of the outlook for rates to remain on hold for the next two years, we believe opportunities exist to create value if the portfolio is positioned appropriately.
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