stashing cash

[calmloki]

We are currently suffering an embarrassment of cash. Five of our loans to flippers have paid off since February (two on Friday!) and we have exceeded FDIC insurance limits on our TIAA and Barclays accounts, where we earn a massive 1%. Looking for a place to have fairly rapid withdrawal ability, better than 1% income, and low volatility vs. the stock market. We could plug some more money into the California double tax free fund, VCADX, as she has declared California residency, but are there better options?

[brewer12345]

What kind of timeline are you looking at? I tent to layer liquidity like this. Some is totally liquid, some semi-liquid (CDs and the like), and some is liquid over a longer time, but not exposed to significant market risk. For the last category, I have been putting money into merger arbitrage funds MERFX and ARBFX.

[calmloki]

Quote:

Originally Posted by brewer12345 What kind of timeline are you looking at? I tent to layer liquidity like this. Some is totally liquid, some semi-liquid (CDs and the like), and some is liquid over a longer time, but not exposed to significant market risk. For the last category, I have been putting money into merger arbitrage funds MERFX and ARBFX.

Probably a year or so - we don't have anyone banging our door for a loan other than one tiny loan that should have been made in December - neither know nor care if it gets made.

Gotta ask why you like MERFX and ARBFX - they don't look to have good performance and have very healthy expense ratios. What am I missing?

[brewer12345]

Quote:

Originally Posted by calmloki Gotta ask why you like MERFX and ARBFX - they don't look to have good performance and have very healthy expense ratios. What am I missing?

These are specialty funds that follow a strategy popular in the hedge fund world, but do so in a very constrained manner that keeps risk low. Over time they make roughly Libor plus 300 to 500 basis points net of expenses. I view them as stand-ins for fixed income with very low duration and modest, idiosyncratic risk.

How they work is described here: Life, Investments & Everything: Picking Up Nickels In Front Of A Steamroller