The Association of Financial Professionals recently released its annual "AFP Liquidity Survey," which shows money market mutual funds losing their position as the largest holding of corporations short-term cash investments to bank deposits in 2009. AFP shows money funds' share declining from a record 39.4% last year to 31.8% in mid-2009, while bank deposits increased their share from 25.0% to 37.2%. The survey also shows organizations increasing their cash balances and the percent using online trading portals remaining stable.
AFP's press release on the survey, entitled, "Companies Stockpiling Cash, Credit Access Still Tight, AFP Survey Shows," says, "With little easing in access to credit, U.S. organizations are continuing to stockpile cash, according the Association for Financial Professionals' 2009 Liquidity Survey. Almost three-quarters (72%) of companies had increased or maintained their U.S. cash balances during the first part of 2009.... 42% of organizations increased their U.S. cash and short-term investment balances between December 2008 and May 2009, while 30% saw no significant change in short-term cash balances."
"Despite unprecedented government action, the lack of any significant thaw in short-term credit access is extremely troubling and many companies are reacting by stockpiling cash," says Jim Kaitz, President and CEO of AFP. "This is the fourth annual survey performed by AFP focusing on how organizations manage their short-term investment portfolios.... The AFP 2009 Liquidity Survey was underwritten by The Bank of New York Mellon," says the release.
The survey says, "Organizations allocate an average 78 percent of their short-term investment balances in three safe and liquid investment vehicles: bank deposits, money market mutual funds and Treasury securities. In the 2008 AFP Liquidity Survey, 73 percent of short-term investment vehicles were placed in the same three investment vehicles, while the percentage reported in the 2007 AFP Liquidity Survey was 67 percent."
Regarding portals, the survey says, "Twenty-six percent of organizations use an electronic, multi-family trading portal to execute at least some of their short-term investment transactions. Organizations using trading portals execute an average of 72 percent of their money market mutual fund transactions through the trading portal.... The use of multi-family trading portals has remained stable over the past few years.... Those organizations using trading portals moved an average of 72 percent of their money market mutual fund holdings through these portals, compared to 80 percent in 2008."