Corporate Cash

Case Study: How we helped a corporate client invest some of their surplus company cash

Our corporate client was holding surplus cash on demand deposit with their local bank, receiving no deposit interest on these funds. We helped put together an investment strategy for a portion of these deposit funds that were not required in the short-term. The objective of investing these funds was to maintain the purchasing power of these monies as inflation is back with a bang. Our work also included advice on structuring investments in the most tax-efficient way and ensuring we did not invest beyond their stated risk tolerance.

Background

The client’s primary objective was to get the surplus funds on deposit working harder, to generate a return that will maintain the purchasing power of the monies. The client has been very unhappy with little or no interest earned on deposits over the past few years for their surplus funds. They identified an amount of surplus cash funds that they are very unlikely to require over the next 3-5 years.

Key Need

Our client wanted to somewhat maintain the purchasing of their surplus cash against a rising tide of inflation. They also had a requirement of access to the funds in the event of an emergency, with no early withdrawal penalties. Any recommendation had to be structured in a tax efficient manner and invested in traditional liquid asset classes.

Solution

Firstly, we undertook risk profiling of the 2 main owner directors to ascertain their investment objectives, investment experience and risk tolerance. This included getting the client to complete a 15-question risk questionnaire.

Secondly, we presented what a typical investment journey will look like (based on history and expected volatility) for different types of investment portfolios. At this juncture we covered the tax benefits for Irish corporates investing in life insurance unit-linked funds vis-à-vis generating passive income (deposit interest etc.), with the likelihood of a liability to corporation tax on investment income and the investment income surcharge.

We then were able to plan and prepare a tax-efficient investment recommendation for funds of €500,000.  The investment proposed was a medium risk portfolio using several unit-linked funds from one of the leading life insurance companies in Ireland. The funds invest in a blend of global equities, European corporate and government bonds, infrastructure equities, private equity, and real estate investment trusts (reit’s), with the funds priced daily. Also, daily liquidity and no exit penalties are additional features in favour of this type of corporate investment.

The client completed the application process online via DocuSign and transferred the €500,000 of cash by electronic funds transfer (EFT). Anti-Money Laundering (AML) was scanned to us with minimal fuss.

The client retained ample cash on demand deposit for day-to-day operational requirements and maintained other surplus funds on short-term deposit for unforeseen circumstances, whilst knowing a significant portion of their surplus cash is working for them in a managed and well-diversified portfolio of assets.