A global cash management study released by SunGard reports on corporate treasury professionals’ changing attitudes toward cash investments driven by economic, regulatory and risk concerns. It also examines their outlooks on strategic cash holdings, asset allocation, investment policies and transaction execution.
Following a similar ‘Cash Management Investment Survey’ that the group conducted in 2011, this latest study identifies trends and developments over the last 12 months, such as an increased surplus of cash and a greater proportion of cash invested in money market funds (MMFs) by some companies as compared to 2011 survey results. In addition, an intensified focus on market issues, such as the eurozone crisis, regulatory changes and counterparty risk, are rising to the top of treasurers’ list of priorities since last year.
Responses were collected from more than 200 corporations globally across various industries, with about 20% representing financial institutions. More than 50% of respondents were from companies headquartered in North America, 32% in Europe, and the rest in the Asia Pacific region. More than 70% of participating companies had annual revenues exceeding US$1 billion. Key findings of the report include the following:
- Some companies are growing their cash reserves, with 37% increasing the amount of surplus cash over the past 12 months.
- Some companies are increasing their shares of cash investments in MMFs. Those using short-term MMFs hold an average of 50% of their cash in these funds, an increase of more than 11% from 2011.
- Although only 9% of companies surveyed invest in MMFs that have a variable net asset value (NAV), these companies hold an average of 36% of their cash in these instruments, against only 4.5% in 2011 – reflecting a change to an investment strategy more in line with regulatory preference for variable funds.
- Forty-three percent of respondents said they use an online trading portal for cash investments, an increase of 6% over 2011.
“Although concerns regarding credit risk and liquidity remain important factors, regulation in the US and Europe has emerged strongly as a concern as lawmakers focus on enhancing the resilience of funds to extreme market shocks,” said Vince Tolve, vice president of SunGard’s brokerage business.
“An immediate issue, however, is the expiration of Federal Deposit Insurance Corporation (FDIC) guaranteed non-interest bearing accounts at the end of this year. Many companies that have used insured bank deposits will need to find alternative repositories for cash. The growing use of online trading portals will provide potential for enhanced visibility, auditability, analytics and operational efficiency as corporate treasurers embark on making new investment decisions.”
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