With $13 billion of cash and top management that understands things like efficient portfolio frontiers, value at risk (VAR) and Sharpe ratios, Google's treasury studied investment companies, pension funds, hedge funds and university endowments and crafted an investment strategy for its long-term cash that looks more like these portfolios than the typical corporate cash portfolios.

Google's treasury shocked the proposed portfolio with the 9/11, the Asian and Long Term Capital Management financial crises and found that it would have bounced back relatively quickly. But Tony Altobelli, assistant treasurer, concedes that the current credit freeze and Wall Street meltdown is "the biggest shock of our generation, the one that will be used to test future portfolios." A lot of quantitative analysis, stress testing and benchmarking was required, but in the end, management was eager to go. "Management has a long-term vision for the company and believed that running the portfolio in the interests of long-term growth, while conceding higher short-term volatility, was consistent with the overall corporate mission. Our job was to figure out how to do it and to educate management on the risk and reward trade-offs of the various strategies," Altobelli says.

It took cooperation from IT, financial strategy and development, accounting, internal audit, cash operations and risk management. While Google is staffing up to manage the new assets and planning to use outside managers for portfolios that require intensive credit research, it is considering using exchange-traded funds to get some exposure to selected assets while it continues to research and hire the best investment managers available, Altobelli says.