Moody’s: Increased Attention On Cash Sweep Programs Creates Problems For Highly Leveraged Wealth Managers

Moody’s Ratings is a bond credit rating operation of the Moody’s Corporation. They provide insights into international financial markets of bonds that are issued by governments and companies.

In their latest report made available to Hedge Fund Alpha, Moody’s discusses the rising attention on the cash sweep program. These implications could prove to be credit-negative for independent wealth managers by reducing their spread-based revenue earned from clients' uninvested cash balances. Also, with it, the rising costs of legal and regulatory compliance occur.

Moody’s first in detail explained what cash sweep programs are. Then they tackled the question of flexibility in shifting client rates and how companies can raise their competitiveness.

What Are Cash Sweep Programs

A cash sweep program is a technique employed mostly...