Corporate treasurers are increasingly zeroing in on U.S. Treasury bills [T-bills] as a relatively safe and liquid investment alternative that is more attractive now that it is yielding improved returns, according to Stephane Lintner, CEO and co-founder of the fintech Jiko.
Lintner’s Oakland, Calif.-based firm that provides on-demand liquidity by enabling companies to make programmatic investments in T-bills is seeing demand for its product coming from CFOs and finance executives under pressure to find a low-risk option for their investments and cash management.
“Right now CFOs are all under pressure to figure out how to shore up cash, keep it at hand, maximize the yield on it and yet take a minimum amount of risk,” Lintner said in an interview. “It’s all about coming back to the basics; where to store core liquidity in the safest way.”
As interest rates have risen against the backdrop of volatile equity and currency markets, the combination of lower risk and higher returns is catching the eye of more finance executives who have often indirectly held Treasury bills within funds that include other assets, Lintner said.
The company, founded in 2016, made headlines in 2020, when it gained a national charter after purchasing a small Minnesota-based community bank, according to a report from Industry Dive sister publication Banking Dive. Previously focused on retail clients, Jiko more recently pivoted from its consumer-focused model and accelerated its business-to-business strategy.
In the last few months it has drawn about 60 new corporate clients for which Jiko manages several hundred million in assets under management, all invested in T-bills, Lintner said.
The interest rate on the one-year T-bill has risen this year to about 4.69% this week, up from about 0.39% at the close of 2021. Indeed the headline of a Sept. 27 Bloomberg opinion piece even dubbed T-bills “suddenly sexy.”
A former Goldman Sachs trader, Lintner also said that companies in the current environment are chasing better yields at the same time that they’re wary of additional risk, especially in the wake of the collapse of the prominent crypto exchange FTX.
“FTX has shown again that it really matters who you’re facing [in terms of counterparties] and what the chain of custody is and where the assets are and whether it’s on balance sheet or a secured security,” Lintner said.
In addition, the traditional alternative that treasurers usually use is money markets and certificates of deposit. But there is a systematic risk to funds and the financial crisis of 2008 showed that funds can freeze and redemptions can be an issue.
However, since 2008 T-bills infrastructure has largely not been updated by banks and the process for accessing them is typically still manual and antiquated, he said. That’s left Jiko, which has been developing its T-bill based fintech platform, in a strong position to meet the demand, he said.
“There’s a scramble right now to look for electronic access to T-bills,” Lintner said. “We happen to be in a unique position because we embraced T-bills.”