How Rho Treasury works
Learn about Rho's bespoke treasury management offering.
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1 minute
August 1, 2024
Back-to-back interest rate increases, a challenging fundraising environment, and a slew of bank failures have sent corporate treasury managers scrambling to diversify their cash holdings.
In this blog, we discuss Rho Treasury more in-depth – what it is and how it helps companies manage their cash better.
Automate your treasury strategy and put your corporate cash to work in U.S. Treasury Bills today.
In March, we witnessed several high-profile bank failures, beginning with Silicon Valley Bank. I will spare you a deep dive into the underlying factors that contributed to this taking place as it has been covered extensively by the press.
However, why it matters for CFOs and founders is that this episode – and the continued reverberations the banking sector continued to feel in its wake – is that it has changed how companies think about corporate cash management. In short, leaving all of your corporate cash in a basic checking account that offers minimal protection is not a viable strategy; you should safeguard every dollar of your business’s funds and diversify wisely.
At Rho, we offer a comprehensive set of solutions built into our platform that make it easy for companies to achieve this:
1. Rho Checking Accounts provided by Webster Bank, N.A., Member FDIC, that are FDIC-insured up to $250,000 per entity.
2. Rho Business Savings Accounts that are built on a network of over 400 FDIC-insured banks, allowing companies holding funds above $250K to access up to $75M in FDIC deposit insurance per entity.
3. Rho Treasury, our treasury management service, invests your excess cash in short-dated government securities held directly in your name.
Starting with the fundamentals, opening a Rho Checking Account, gives customers the standard of up to $250,000 FDIC insurance per entity. We have also discussed how Rho Business Savings Accounts offer companies the ability to access additional FDIC deposit insurance on their cash reserves in excess of $250,000.
In concert with the aforementioned cash storage offerings, how does Rho Treasury help finance leaders further elevate a well-rounded cash management strategy? Let’s start with an overview of the offering.
Rho Treasury is our corporate treasury management service that invests your excess cash in short-dated government securities that are held in your name.
Once onboarded to Rho, clients select a custom investment policy tailored to their business’s unique liquidity and security needs, supported by Rho’s in-house investment team. Rho's platform then actively adjusts customers’ portfolios to earn market rates while monitoring operating account balances and automatically transferring money as needed.
And all of this is fully integrated into the Rho platform so customers can seamlessly manage their Rho Treasury account in the same place they manage employee expenses, pay vendor bills, and more.
In short, you don't need to be an expert on T-Bill ladders to put your cash to work and earn yield that can extend your runway.
You can find a more comprehensive set of FAQs about Rho Treasury in this Knowledge Base article, but we have curated the five most common questions we receive from customers.
Rho Treasury is perfect for clients who want to have more control over the assets their excess cash is invested in.
For example, money-market funds offer ease of use and market-competitive yields, but they do not provide a level of customization as you are buying into a fund. In addition, they can lose money.
With Rho Treasury, we make it easy for your business to invest in short-duration, investment-grade securities that are held in your business's name – and our platform actively adjusts your portfolio on your behalf to earn market rates and monitors operating account balances, automatically transferring money as needed.
If you prefer to invest significant time hands-on managing your corporate cash, then Rho Treasury is likely not a fit. For those interested, I recently wrote why it’s in founders’ and busy finance leaders’ best interests to automate this function.
Signing up for Rho Treasury can be done in two steps. First, sign up for a Rho account. If you are approved as a customer, we will then connect you with an SEC-registered investment advisor representative who will then work with you to set up your account.
Applications can be completed in under 15 minutes – and the time to approval for investment is typically 3-5 business days.
To support an efficient onboarding process, it’s important to have the following documentation prepared:
Securities held are based on your company's individual investment policy. For the most part, holdings are restricted to U.S. Treasuries. However, if your company’s investment policy allows for high-end investment-grade corporate bonds and U.S. Bank CDs, then those may be held in your account as well.
As we have covered in a previous guide, T-bills can be a strong tool in your cash management strategy. However, as I have written about for TechCrunch, effective cash management requires more than a set-it-and-forget-it approach. With Rho Treasury, we handle this heavy lifting for you.
As for money-market funds, they are a popular corporate cash management tool as they provide competitive yield and are relatively easy to use. However, as many veteran corporate cash managers know, they aren’t without risks.
First, you can actually lose money. As noted earlier, a money market fund is an investment vehicle that strives to maintain a net asset value (NAV) of $1.00 but does not guarantee that. The assets inside each fund are purchased because of their perceived stability in price. While each asset price can move, on aggregate, the NAV of the fund should remain stable at $1.00.
However, during extreme financial distress, the underlying assets in a money market fund can fluctuate. If you needed to redeem your funds at times like these, you could lose money. This happened during the 08’ financial crisis.
Second, you may not get your funds when they are needed, which is a major problem many experienced in the aftermath of the SVB collapse. Most investors in money market funds assume they can redeem and get their cash back at any time. Generally, this is true in peaceful waters; however, some money market funds have built caveats in the shape of liquidity provisions or limitations on redemption schedules.
In times of market turmoil, investors theoretically could attempt to redeem all their shares simultaneously, causing a run on the fund, similar to a run on the bank. In March 2020, this happened to a Goldman Sachs fund, requiring them to inject over $1 billion into it to maintain its NAV and prevent investor losses.
The final consideration we’ll raise is that money market funds are pooled investment vehicles vs. individual asset portfolios. With Rho Treasury, securities are held in your name at our partner clearing broker, and you know exactly what assets you own and how much you own of each type.
It’s important to note that your actual returns, if any, will vary based on a variety of factors and circumstances, including, without limitation, your unique assets and investment policy selection. Net returns are based on 90-day T-bill rates, which you can find at rho.co/treasury.
However, as discussed earlier in this post, yield requirements should be balanced with the diversification needs of your business. With our comprehensive services, we make it easy for companies to safeguard and diversify every dollar of their business funds amid market volatility – and generate market-competitive yields in the process.
Have questions or are interested in getting started with your Rho Treasury account today? Sign up with your business email at rho.co/treasury today to begin a conversation with our experts today!