Xencor Inc 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risks primarily related to changes in interest rates arising from our investing activities. Our cash, cash equivalents and marketable securities are subject to interest rate risk, which may affect interest income and, to a lesser extent, the fair value of our investment portfolio. Adverse changes in interest rates may occur as a result of changes in market liquidity, credit conditions or general economic factors. Our investment activities are governed by our Investment Policy, which is designed to preserve principal, maintain liquidity to meet operational needs and optimize investment returns within acceptable risk parameters. Under this policy, we primarily invest in high-quality corporate securities and U.S. government agencies with strong credit ratings. We classify our marketable securities as available-for-sale, which provides flexibility to manage our portfolio in response to market conditions, liquidity needs and investment opportunities. Due to the relatively short-term nature and conservative risk profile of our investment portfolio, we do not believe that a sudden change in market interest rates would have a material adverse effect on the fair value of our investments, results of operations or cash flows. Accordingly, an immediate change in interest rates would not be expected to materially impact our financial condition. We do not believe that our cash, cash equivalents and marketable securities are subject to significant risk of default or illiquidity. However, we maintain balances at financial institutions that may exceed federally insured limits, and while management believes these institutions are creditworthy, we cannot provide assurance that future adverse events will not affect the value or liquidity of such holdings. 67