Ask a trustee, fund administrator, or family office to describe their investment strategy, and equities, fixed income, alternatives, even private credit will come up long before cash does. When cash is mentioned at all, it’s usually as an afterthought. Cash is the place money sits between “real” decisions. That framing deserves more scrutiny than it gets.
The asset class hiding in plain sight
Cash held on behalf of clients is not neutral. Every balance sitting in a non-interest-bearing account, or parked indefinitely with a single bank, represents a choice even if nobody remembers making it. The industry has spent years building increasingly sophisticated frameworks for evaluating investment manager selection, asset allocation, performance monitoring and risk appetite. Cash has largely escaped that scrutiny, treated as though it sits outside the portfolio rather than as the most liquid, most exposed position within it.
Why the old excuse is wearing thin
For years, near-zero interest rates made this oversight cheap. Whether cash sat with one bank or ten made little practical difference to the client. That excuse has expired. In a materially different rate environment, the gap between an actively managed cash position and a neglected one is no longer trivial, and neither is the counterparty risk that comes from concentrating balances with a single institution, however well-regarded.
A fiduciary question, not just a commercial one
This has quietly become a fiduciary question. A trustee who diligently selects and reviews investment managers, but has never reviewed where client cash sits or why, has made an investment decision by omission. Prudent person standards were never written with an exemption for cash. As due diligence expectations tighten across international finance centres, “we’ve always used this bank” is increasingly hard to defend as a documented, reasoned position, simply because it isn’t one.
What changes when cash is treated as a real allocation
Treating cash seriously doesn’t require exotic thinking. It means the same basic discipline applied everywhere else: understanding counterparty concentration, reviewing whether rates are competitive, matching liquidity structures to actual need, and being able to explain on request why cash sits where it sits. None of this is complicated. What’s remarkable is how rarely it’s actually done.
The industry doesn’t need a new theory of cash. It needs to stop treating it as the one asset class exempt from the questions asked of everything else. Beneficiaries, auditors and regulators are increasingly willing to ask those questions themselves. The only choice left is whether the answer already exists, or has to be improvised on the spot.