Liquidity Management

Learn about our holistic approach to cash segmentation strategies.

Our approach

All clients have unique liquidity needs. For most investors with significant cash, capital preservation is paramount, and secondary is balancing the tradeoffs between stability, liquidity, and yield. However, not all liquidity management solutions are the same and each comes with a varied level of risk and yield. To help navigate the tradeoffs and various offerings, we employ a three-tiered cash segmentation strategy designed to address client goals based on time horizon.

People meeting (mindshare)

Transactional

Also referred to as everyday or operational cash, transactional cash is often used to purchase investments, pay bills, and manage daily expenses. Cash in this tier seeks stability, minimal volatility, and liquidity with frequent cash flows, and is short term—typically overnight to three months.

Strategic

Not usually needed for day-to-day cash requirements, strategic cash is also called savings and investment cash. It can be used to potentially earn a higher yield with investments that help to preserve principal while retaining easy, though potentially more limited, access to funds. The focus is on seeking stability/liquidity and yield with moderate cash flows and modest volatility. The time horizon is typically 3 to 12 months.

Opportunistic

For cash that can be invested for a longer term, the opportunistic tier is used to explore market opportunities that may be available in lower credit quality securities or further out on the yield curve. Stability and liquidity are weighed against these market opportunities, with the potential for higher yield but significantly less liquidity. These investments typically experience the highest volatility of the three tiers and typically have a target horizon of 12 to 24 months.

  Transactional Strategic Opportunistic
Time Horizon Short term, typically overnight to 3 months Short to intermediate term, typically 3 to 12 months Longer term, typically 12 months or longer
Focus Seeks stability and liquidity Seeks stability, liquidity, and yield Potential for higher yield
Cash Flows Frequent Moderate Less frequent
Options

What we offer

Charles Schwab’s team of financial professionals offers deep experience in investment approaches and has access to a comprehensive lineup of tax-exempt and taxable strategies with risk-adjusted performance track records.

Liquidity Management insights

Detailed information on Liquidity Management at Charles Schwab.

Brief overview of Liquidity Management at Charles Schwab.

Liquidity management: Balancing risks in the search for yield.

Contact us

Reach out to Schwab Asset Management to answer any questions you have about Liquidity Management at Charles Schwab.