INTERNATIONAL CASH POOL - ICP
The term institutional cash pool refers to large (at least US$ 1 billion), centrally managed, short-term cash balances of global non-financial corporations and institutional investors such as asset managers, securities lenders and pension funds (Pozsar, 2011). Institutional cash pools have become increasingly prominent since the 1990s, "driven by three secular developments in the non-financial corporate and institutional investor landscapes" (Pozsar, 2011).
First, the rise of globalization and the related rise of (i) large, global corporations and centrally managed corporate cash pools, and (ii) inequality, whereby an increasingly small core of the global population controls an increasingly large share of incomes and wealth (Pozsar, 2011).
Second, the rise of asset management, and the related rise of (i) the centralized liquidity management of mutual funds, separate accounts and hedge funds within fund complexes, and (ii) securities lending, and the related rise of cash collateral reinvestment pools (Pozsar, 2011).
Third, the rise of derivatives-based investment styles-such as futures-based duration positioning, liability-driven investing and synthetic ETFs-which involve overlaying derivatives (such as futures and total return swaps) onto separately managed cash pools (Pozsar, 2011 and 2012).
ICP are key players in the so-called shadow banking system, since they manage relevant resources, and look for short term safe assets (Classens et al, 2012). Regulation is opaque on such intermediaries, and statistical data are very scarce and not homogenous among different countries and regulation.
Claessens Stijn, Zoltan Pozsar, Lev Ratnovski, and Manmohan Singh (2012) Shadow Banking: Economics and Policy, IMF Staff Discussion Note, 4th December.
Pozsar Zoltan et al (2012), Shadow Banking, Federal Reserve Bank of New York, Staff Report, n.458.
Pozsar Zoltan (2011), Institutional Cash Pools and the Triffin Dilemma of the U.S. Banking System, IMF Working Paper n. 190, August.