The Federal Reserve eased its policy rate again in October, a welcome relief to American firms burdened by high interest costs. While monetary policy will remain a headwind for the foreseeable future, some corners of the corporate finance world will miss the flipside of higher rates: the opportunity to earn strong, low-risk returns on cash balances.
Short-term rates are falling but sit well above the 2010s, a boon for treasurers and CFOs with cash on hand. Even so, not all corporates are capitalizing on today’s macroeconomic conditions to the same degree. Many firms—some the largest and most sophisticated in the country—are leaving easy money on the table by failing to adjust their investment strategies.
There are costs to doing nothing. Adopting a dynamic approach to cash management is a necessary step to better bottom lines. CWAN data suggests dozens, if not hundreds, of firms on our platform could achieve better portfolio performance by paying more attention to shifts in monetary policy and the bond market.
A bias towards inaction is, to some extent, systemic for corporates. Cash and liquidity strategy is typically an unglamourous affair, as treasurers and CFOs prioritize operational requirements over higher, long-term performance. Firms do not invest like insurers, pensions, or endowments; volatility is the enemy, and their needs, often calendar-driven, arrive quarter to quarter. The goal is to ensure that resources are available to pay salaries, finance projects, and keep the lights on.
A short-term horizon does not imply that corporate strategies are stagnant, however. Though firm bylaws often restrict where and how corporates can invest (not in equities!), portfolio allocations do shift within narrow parameters. Firms can dial up cash and cash equivalent investments or pivot to longer-dated Treasuries and structured products. Today, while adding duration, some firms have even begun to invest in privately placed corporate bonds, leaning into the alternatives space.
Despite limitations on how to invest, corporates do not approach cash management as a monolith. As a result, there is variation in returns, which can intensify when monetary policy shifts gears. Performance converges when short-term rates are stable and diverges when the Fed hikes or eases (as is the case today). In a world where duration seldom extends beyond one year, small changes can mean large differences.
The distribution of firm performance varies by year, and no strategy is a consistent winner. (It is not simply that some firms are allowed to invest in corporate bonds while others are forbidden.) In one year, high allocations to cash can outperform. In another, duration triumphs. What matters, as a strict rule, is dynamism. Across CWAN’s platform, those firms that invest tactically tend to outperform those who don’t. Outperformers tend to outperform consistently.
Firms that do not adapt to changing market tides risk losing out on millions. 50 basis points, multiplied by hundreds of millions (regularly, billions) of dollars means additional flexibility, more buffers against tariff-induced inflation, and, ultimately, better bottom lines.
Why are some firms better at this than others? A more precise question: why are some firms static in their strategies? The answer is likely a matter of incentive structures. As a colleague put it, “No one thanks you for an extra 25 basis points of performance, but if the cash isn’t there when you need it, you get fired.” Cash managers are not looking to garner praise. If attention is paid, it is often of the wrong variety.
Still, better performance should matter more for various stakeholders, from board members to shareholders. Firms making tough choices about layoffs to protect margins should first take a look at cash management and how best to respond to changes in monetary policy and the bond market.
Some quick math shows why a dynamic approach is critical: 50 basis points in performance on $1 billion in assets = $5 million. If we assume an average salary in the US, that’s around 75 jobs. These numbers are not so hypothetical; they reflect incremental revenue that is well within the reach of American firms.
In 2025, the best performers on CWAN’s platform have been those that anticipated changes in monetary policy. Year to date, there is a strong relationship between duration exposure and performance.
But, as noted, there is no universal strategy for success. A duration play was hardly the move 1-2 years ago.
Those firms that identified changes in the macroeconomic landscape have performed best. In an investment climate marked by volatility, inflation, and monetary policy pivots, dynamism was their winning strategy.
Additional research by Tyler Busby, Data Scientist
This research was featured in Reuters on November 18th, 2025.