Understanding cash sweeps
Investment funds operating across multiple entities (SPVs, holding companies, co-investment vehicles, etc.) often hold cash fragmented across multiple accounts, entities, and jurisdictions. Getting a clear view of the fund's overall cash position can be challenging, often requiring manual reconciliation. Holding idle cash balances fragmented across entities can come at a cost, including the need to hold more total cash than necessary and the administrative expenses of manual transfers that might be required. A cash sweep can help provide a single view of the liquidity of the fund, and automate, and optimise cash across that fund.
With a cash sweep, surplus funds from various accounts are automatically transferred (or “swept”) into a central account. The objective is to minimise the required use of available cash, enhance the yield on cash held, and have a centralised view of liquidity across the group. The sweep reduces the need for manual payments between the group's entities.
Typical implementation for multi-entity funds
Cash sweeps are most relevant for funds that operate multiple legal entities (SPVs, holding companies, co-investment vehicles, etc.), and have significant or recurring cash flows (dividends, debt service, proceeds, etc.). In a typical implementation, each SPV is targeted to keep a zero-balance or target-balance account with the excess funds swept weekly into a fund-level operating account.
A single view of cash
Getting a single view of cash across the group, including cross-jurisdictional and cross-currency transactions, without manual reconciliation, enables better-informed decision-making. Better cash flow forecasting is enabled by allowing fund managers to see all inflows and outflows in one place. And less fragmented cash enables the fund to operate with lower overall cash levels, reducing the cash drag to the fund.
How Ebury Institutional supports clients with cash sweeps
- Single view of liquidity: Consolidated view of cash and transactions across the group without manual reconciliation
- Efficiency: Eliminates the need for manual intra-group transfers.
- Cash yield: Centralised balances can improve the yield on cash held
- Cash usage: Reduce fragmented cash and lower the overall cash usage
- Instant intra-group transfers: Instant intra-Ebury transfers, cross jurisdiction and cross-currency
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