Liquidity Management

For many investors with significant cash, capital preservation is essential. The key to successful liquidity management? Effectively navigating the trade-offs between stability, liquidity, and yield based on time horizon.

Navigating the liquidity landscape

Learn about the different aspects to consider in a liquidity management strategy and how Schwab Asset Management helps advisors navigate the trade-offs and various offerings.

Our approach

All clients have unique liquidity needs. Capital preservation is often the main priority, and secondary is balancing the trade-offs 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 trade-offs and various offerings, we employ a three-tiered cash segmentation strategy designed to address client goals based on time horizon.

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 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 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.

Compare solutions

	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	Bank Sweep and Schwab One Interest Schwab Government and Treasury Money Funds Savings and checking accounts offered through Schwab Bank	Schwab Prime and Municipal Money Funds Certificates of Deposit from Schwab CD OneSource Fixed Income Investments	Schwab Managed Account Services™ Wasmer Schroeder™ Strategies

What we offer

Charles Schwab’s team of financial professionals has extensive knowledge of liquidity solutions. We are a resource to help advisors and their clients navigate the complexities of liquidity management through a detailed approach based on the client’s unique needs and available investment options.