Mercury Treasury, offered by Mercury Advisory, LLC, an SEC-registered investment adviser, recommends a portfolio based on how your company uses cash. Instead of asking you to pick a percentage split between funds, we look at how many months of cash outflows your deposit covers and match each month to the right holding. This article explains how the recommendation is built. The recommended portfolio can always be customized to fit your business needs.
What we ask you
Your recommendation is built from three inputs:
- Monthly cash outflows. What your company spends in a typical month, across all of its accounts, not just Mercury.
- The amount you're moving into Treasury.
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Your investment objective.
- Prioritizing stability keeps the more liquid part of your portfolio heavily weighted towards a government money market fund.
- Prioritizing yield adds a greater weight in the more liquid part of your portfolio to an ultra short-term bond fund. This fund can have small price fluctuations, also called a variable NAV (net asset value).
Dividing your deposit by your monthly cash outflows gives your months of cash coverage. That number drives your portfolio recommendation.
The three parts of a Treasury portfolio:
| Part | What it holds | Liquidity | What it's for |
|---|---|---|---|
| Near-term | State Street Institutional U.S. Government Money Market Fund: Mercury Class (MRGXX) | Same day, before 3pm ET on business days | Cash you’ll need in the short term |
| Reserve | Morgan Stanley Ultra-Short Strategy Portfolio: Mercury Class (MCRYX) | 1 to 2 business days | Cash you'll need in coming months |
| Long-term | A ladder of individual US Treasuries, one maturing each month | Returns as each Treasury matures; can be sold earlier at market value with 1-2 day liquidity | Cash you don't expect to need for a year or more |
How the recommendation is built
- Your first three months of cash go to Near-term.
- Months four through twelve go to Reserve if you chose Prioritize yield. If you chose Prioritize stability, they stay in Near-term.
- Everything beyond twelve months goes into a Treasury ladder, one rung per month of cash, up to 12 rungs. Past 24 months of cash, each rung gets larger rather than the ladder getting longer.
The order reflects Mercury Advisory's investment priorities: protect your principal first, keep cash available when you'll need it second, and pursue additional yield only with money that clears those two bars.
An example
Say your company spends $50,000 a month and moves $1,000,000 into Treasury. That's 20 months of cash.
| Part | Objective: Prioritize yield | Objective: Prioritize stability |
|---|---|---|
| Near-term | 3 months ($150,000) | 12 months ($600,000) |
| Reserve | 9 months ($450,000) | None |
| Long-term ladder | 8 months ($400,000) in 8 rungs of $50,000 par value | 8 months ($400,000) in 8 rungs of $50,000 |
If your deposit covers 12 months of outflows or less, the recommendation won't include a ladder. A company that may need all of its cash within a year risks having to sell rungs of the ladder early, possibly losing principal.
Choosing something different
The recommendation is a starting point, and nothing is invested until you approve it. Alongside Recommended, you can choose Stay liquid (everything in the government money market fund), Remain balanced (everything in the ultra short-term bond fund), or Custom, where you set months per part and the number of rungs. If your deposit covers fewer than four months of outflows, a ladder isn't possible and Custom isn't offered. A few guardrails apply in Custom:
- At least three months of cash stay in Near-term. This buffer keeps cash on hand for everything else you do in Mercury, so you never have to sell Treasuries early to cover spending. A portfolio can’t be 100% US Treasury ladder.
- Each ladder rung is equal to or greater than your monthly cash outflows in $1,000 increments.
- A ladder can have up to 36 rungs. Later rungs will be empty if your deposit is insufficient to fill in all the rungs.
Whatever you choose, you approve every target before anything is traded, and Mercury Advisory only trades toward the targets you approved.
Keeping your recommendation current
Your monthly cash outflows figure stays as you set it until you change it. If your spending changes meaningfully, revisit it from Edit portfolio on your Treasury page.
U.S. Treasury securities held in a Treasury ladder fluctuate in market value before maturity as interest rates change. Selling a Treasury ladder before its maturity date may result in a gain or loss. Mercury Advisory’s portfolio management is designed to avoid selling Treasury ladders before they mature.
All investing involves risk. Yields fluctuate, may decline, and are not guaranteed. Past performance is not indicative of future results.
Mercury Treasury is offered by Mercury Advisory, LLC, an SEC-registered investment adviser (“Mercury Advisory”). This communication does not constitute an offer to sell or the solicitation of an offer to buy any security. All Brokerage and Clearing services are provided by, and securities are offered through Apex Clearing Corporation, an SEC-registered broker dealer and member FINRA/SIPC. Treasury accounts are not FDIC insured, are not bank deposits, and are not guaranteed by Choice Financial Group or Column N.A., and may lose value. Mercury Advisory is a wholly-owned subsidiary of Mercury Technologies, Inc. Learn more here.