sentinel FAQ Yanked

How can Sentinel consistently earn high yields on short-term investments without taking excessive risk?

How can I be sure my money is safe at Sentinel?

That is history. How can Sentinel ensure that such a record will continue?

Exactly what happens to the cash invested by Sentinel?

How does Sentinel help clients control expenses?

If I invest through Sentinel, do I also need a bank account?

How can I determine the real rate of interest a bank pays, and how much it really costs to use bank services?

Doesn't a 'sweep account' achieve the same thing?

Are investments made through Sentinel insured?

How is Sentinel different from a money market mutual fund?

If Sentinel is not a mutual fund manager, what is Sentinel's role?

How frequently can I deposit or withdraw cash?

What if I don't need daily liquidity?

What is the minimum account size?

Does Sentinel accept accounts in currencies other than dollars?

Your Disclaimer states that Sentinel is open only to corporations, institutions, and accredited investors. What are the criteria for being an accredited investor?

How can a Sentinel Margin Certificate (certificate of margin deposit) reduce trading risk?

What is the advantage of using The Bank of New York as custodian?

How is Sentinel compensated for its services?

How do I open an account?



» Answers To The Above Questions


How can Sentinel consistently earn high yields on short-term investments without taking excessive risk?

Sentinel uses four techniques to earn high interest without additional risk:

• Most importantly, Sentinel invests client cash mostly in the overnight market. Interest rates in this market reflect the overnight rates which banks pay to each other (the 'Fed Funds Markets'). The overnight rate is almost always higher than the rate on the shortest U.S. Treasury obligation, the 90 day Treasury Bill. (Financial specialists refer to this as a 'negatively sloped yield curve;' that is, an investor can obtain a higher rate by investing for a shorter rather than longer period. Beyond 90 days, the 'yield curve' is usually positively sloped.) Over the past twenty years, on average, Sentinel's overnight rate has exceeded the 90 Day Treasury rate by about 0.50%.
  
  
• Second, by consolidating the purchases of a number of investors, Sentinel has more bargaining power with wholesale securities dealers than each investor alone. As a result, Sentinel buys securities more cheaply, and as a result, earns a higher yield than if investors bought securities on their own. (On a fixed rate security, the less the purchase price, the higher the yield.)
  
  
• Third, frequency of compounding. Sentinel compounds in increments of $1,000. At today's interest rate levels, that results in weekly compounding on an account of about $1 million. $5million results in daily compounding.
  
  
• Finally, through Sentinel, 100% of invested principal earns interest 100% of the time. A bank's 10% reserve requirement means that interest is earned only on 90% of an account's balance. That reserve reduces the net yield by 10%. In other words, the net interest earned is only 4.05% if the bank is paying interest of 4.50%.
  
  
  

Sentinel's twenty-seven year record speaks for itself. Sentinel's systems and services are put to their most important test when the global financial system is under stress. Since its founding in 1979, Sentinel has never lost a dime of client funds, or delayed even one day in returning the full amount of a client's cash regardless of prevailing market conditions. During the volatile years of high interest rates in the early 1980s, the market fall of October 1987, and the collapse of major trading firms like Stotler in 1990 and Barings in 1995, Sentinel has proved its worth by ensuring that client cash is safe and liquid. In September, 1998, the near collapse of the hedge fund, Long-Term Capital Management, once again raised questions that even large, well capitalized brokers may not be immune when financial markets are in disarray.

Underlying that record are Sentinel's unique structure and systems:


• Sentinel is registered with three regulatory agencies: the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the Congressionally-chartered self-regulatory body, the National Futures Association (NFA).
  
• Sentinel buys only the highest quality and most liquid securities (unless specifically directed by a client to seek higher yield in somewhat lower quality issues). Sentinel will not use derivatives, options, or any other 'financial engineering' techniques to enhance the yield on its portfolios. Sentinel's objective is to achieve the highest yield consistent with preservation of principal and daily liquidity, not simply 'the highest yield'.
  
• Sentinel deals only with investment firms of the highest standing in the industry. Further, it buys from no fewer than four different dealers, both to ensure fair pricing, but also to diversify counterparty risk.
  
• Sentinel will only release securities taken as collateral when it has received payment ('DVP' or delivery vs. pay)
  
• Finally, Sentinel's custodian, The Bank of New York, is one of the three top ranked custodians in the U.S. Its size, reputation, and concentration on custody and clearing provide additional assurance to Sentinels' clients that their liquid investments are being serviced by the highest quality professionals in the business. And because they are held in custody, these assets are protected by federal fiduciary law from any third party claims against the bank. Unlike FDIC insurance for bank deposits, there is no limit on the amount of protection this federal law can provide.
  
  
  

Sentinel clients have an indirect, undivided pro-rata ownership interest in a pool of high quality, liquid securities. Sentinel's Treasury Only Portfolio (TOP) consists of direct obligations of the U.S. Treasury. The 125 Portfolio and Prime Portfolio consist of money market securities issued by U.S. government agencies, corporations, or short term bank time deposits, all of which meet Sentinel's requirements for liquidity and low risk. Although Sentinel strives to obtain a high yield from all portfolios, the primary emphasis is on safety (low risk) and liquidity.

Sentinel clients receive a daily account statement (by email or fax), which shows, down to the penny, precisely what securities they own. All securities are delivered and held in Sentinel's omnibus custody account at The Bank of New York. By law, assets in a fiduciary account are not considered liabilities of the bank itself, and are therefore protected from any possible third party claims against the bank itself.

Sentinel does not charge its clients for each specific service the way a bank does. At Sentinel, there are no charges for maintaining an account, for reporting, for each debit and credit, for investigations, or for the many itemized charges typical of a bank. Sentinel is compensated by an 'all-in' management fee based on the volume of assets under management.

Further, Sentinel's comprehensive service including well-established, professional relationships with major securities dealers, an exclusive focus on short term investing, and detailed, daily reporting allows clients to significantly reduce the time its own staff devotes to daily investing. Firms in a start-up or early growth stage often find that they don't need additional staff: outsourcing the function to Sentinel allows them to devote full time to the core business, whether it is trading, distribution, or widget manufacturing.

In some cases, no. The full answer depends on each client's overall circumstances and needs. An off-shore futures or hedge fund, for example, might not need a U.S. bank account at all. Instead, Sentinel can perform all the necessary services of receiving, investing, and transferring funds. For U.S. entities (domestic funds and corporations), a Sentinel account might eliminate the need for an additional, special-purpose bank account, although the entity would most likely maintain a bank account for its own internal use. At a minimum, a Sentinel account would supplement a bank DDA, allowing a client to earn a higher rate of interest on idle balances, while reducing the high expenses often associated with bank DDAs and an associated 'sweep' account.

A bank's monthly 'account analysis' provided to corporate accounts is a complex document that many corporate treasurers suspect is deliberately constructed to hide the true cost of using a bank's services. Even the so-called 'earnings allowance' or 'earnings credit rate' the mechanism banks use to attribute value to interest-free balance is virtually impossible to decipher without a good computer program handy.

Some may believe that bank services 'don't cost anything because they are paid with balances.' In fact, the opposite is true: it costs more to pay with balances than to pay cash and invest the excess in an interest bearing money market account such as the one managed by Sentinel. Paying with balances is more costly for the following reasons:


• The earnings credit rate takes into account a bank's 10% reserve requirement. That means only 90% of account balances are at work.
  
  
• The earnings credit rate is an administratively determined rate with its own built in profit margin on top of the profit margin imbedded in the price of each specific service. The earning credit rate is no more reflective of a true market rate of interest than is the 'prime' lending rate.
  
  
• There is no value whatsoever for any 'excess' earnings credit remaining at quarter- or year-end. The earnings credit is like Monopoly money. It can only be used to buy account services at one place the issuing bank. If there is an excess, it can't be used anywhere else. It cannot even be spent at that bank the following year. It will only buy services the year in which it was earned. Put another way, the earnings credit is like an option issued monthly for additional services from the issuing bank. And each of these options has an expiry date of December 31.
  
  In most cases, corporations, therefore, are better served by keeping only enough cash balances in their DDAs to meet daily operating needs, and transferring any excess to an interest bearing account where they are assured a market rate of interest.
  
  Sentinel will be pleased to assist prospective clients with an analysis of the true costs of paying with balances, and demonstrate how much more excess cash would earn if invested for a real market rate of return (without sacrificing liquidity or safety).
  
  
  

At greater cost and risk than Sentinel. A bank typically assesses a monthly charge for sweeping daily account balances into an overnight investment account, and may assess additional charges for each debit and credit. Funds are typically swept either into a higher-risk mutual fund account--uninsured, not a bank liability, invested in unidentified securities, and most likely subject to a five day hold--or into a bank's uninsured, non-U.S. offshore account. In contrast, there is no monthly charge for maintaining an account at Sentinel, only an "all-in" management fee based on the volume of assets under management.  Additionally, investments are held in custody at The Bank of New York under the protection of U.S. fiduciary law. Because investors indirectly own an undivided pro-rata interest in a pool of liquid, high quality securities, investors have immediate daily access to 100% of their investment no matter how volatile market conditions become.

Sentinel accounts are protected by something stronger than insurance: federal law. Client assets managed by Sentinel are held in custody at The Bank of New York under the protection of the U.S. Treasury's Office of the Controller of the Currency regulations governing fiduciary institutions. Unlike FDIC insurance, which covers only the first $100,000 of bank's liability to depositors, there is no financial limit on the protection provided by fiduciary law. Assets held in custody are immune from the bank's creditors. Should the bank fail, assets held in custody would be transferred at full value to another custodial institution.

• Most importantly, clients have immediate access to their cash, regardless of market conditions. (A mutual fund is allowed to postpone redemptions up to five business days in unstable market conditions.)
  
  
• Second, through Sentinel, clients know exactly what they own. Sentinel sends daily emails (or faxes, if preferred) to each client reporting the total amount invested, the interest earned, and supporting securities.   In contrast, mutual funds are typically sent statements on a monthly basis at most, and report assets owned by the fund only quarterly or semiannually, often two to three months following the reporting date.
  
  

Sentinel acts as an agent for its clients. Clients sign an Investment Management Agreement appointing Sentinel as a discretionary investment advisor to supervise and direct the investment of assets in the account on behalf of the client in accordance with the risk parameters agreed upon.

Sentinel clients can withdraw 100% of their cash daily. Sentinel accepts deposits of any amount daily.  A cutoff time of 4:00PM (eastern time) applies for notification of intent to redeem or make deposits same day.

Clients who do not need daily liquidity for the entire amount of their investment can authorize Sentinel to invest for longer periods. This gives Sentinel the flexibility to seek slightly higher yields when the short-term yield curve is more steeply sloped.

Sentinel's services are designed for corporate treasury departments, institutional investors, financial professionals and qualified private investors. Accounts as small as $500,000 can be opened, provided they are expected to grow to a minimum of $1 million within six months. Exceptions can be made for start-up situations where the initial investment may fall below that minimum.

Yes. Sentinel opens accounts in most major currencies.

Individuals (or joint with spouse) must have financial net worth of at least $1 million or income in excess of $200,000 annually for the past two years.

A margin certificate protects traders in the OTC currency and bond markets against the failure of their trading counterparty. Instead of delivering margin to the broker/dealer, where they become general liabilities of the firm, traders deposit cash into a Sentinel account at The Bank of New York, where they are held in custody as margin for the benefit of the counterparty. By terms of the certificate, the counterparty can draw on them only to satisfy amounts the client owes. The assets used as margin are thereby protected against any third party claims against the counterparty in the event of the latter's failure or illiquidity.

The Bank of New York is one of the top three bank custodians in the U.S. with more than $4 trillion in custody and the largest global network of subcustodial relationships in the world. On any given day, it clears up to 50% of the U.S. Treasury market, clears more than 60,000 securities transactions worth $600 billion, and makes more than 100,000 cash transfers. The Bank of New York's size, systems, expertise are essential elements of Sentinel's ability to tailor its services to each client's specialized needs.

Sentinel's reasonable management fee is based on assets under management, and is taken out of interest earned, never from principal. Unlike a bank, Sentinel does not charge clients for maintaining an account, for reporting, for each debit and credit, for investigations, or for the many itemized charges typical of a bank.

Contact Sentinel to request the account opening package by phone or e-mail. A Sentinel officer will ask about the projected size and purpose of the account in order to ensure than you meet the criteria which Sentinel is required by law to observe.