FIS, formerly SunGard, released its "FIS' 2016 Cash Investment Survey" last week, which attempts to gauge corporate investors preferences regarding the new post money fund reform liquidity regime. It explains, "Rapidly changing economic and regulatory conditions are creating enormous investment challenges for organizations globally. With low and negative interest rates, changing bank appetite, and new instruments emerging, how do treasurers and CFOs define, and deliver on, the right investment policies to reflect these changing times?"
FIS explains, "Now in its 6th year, FIS has launched its annual study amongst corporate treasury and finance professionals, and we want to hear from you. This study helps us to understand investment trends and priorities, gain insights into corporate cash investment policies and transaction methodologies, attitudes toward risk and return, and chosen investment instruments. By analyzing results year on year, the survey tracks shifts in investment strategies and priorities over time, and identifies best practices amongst corporations globally."
The survey asks about the company's primary industry, headquarters, and location of treasury center. They also ask: "To what degree is your treasury organization centralized?" "To what extent has your surplus cash balance changed over the past 12 months?" Answers include: Increased by 0-33%, Increased 33-66%, Increased more than 66%, No material change, Decreased by 0-33%, Decreased 33-66%, and Decreased more than 66%." Options for "primary reason for holding a surplus cash balance" include: "Finance capital investment or mergers and acquisitions, Return to shareholders, Pay down debt on maturity, Working capital financing, Protect the business in the event of a fall in revenue, and Other."
Among the "most significant cash investment challenges that you are experiencing today," answers include: "Insufficient credit limits available with highly rated banks, Low or negative interest rates, Inability to gain visibility over cash globally, Inability to access 'trapped' cash in some markets, Concern over risks in Eurozone/Brexit, Insufficient range of suitable investment, Instruments available, Money market reform (fees, gates, floating NAV), Reduction in banks' appetite for time deposits below 31 day maturity, and Lack of automation."
FIS also asks, "Which of the following statements best describes your cash investment strategy? Preservation of capital while ensuring immediate access to all cash; Preservation of capital while ensuring immediate access to short term cash, and a higher yield on cash not required immediately; Preservation of capital and liquidity as required, but aiming for optimum return; and, Other (please specify)."
They inquire, "What is your current asset allocation by instrument type?" Possible answers include: Certificates of deposit, Commercial paper, Deposits, Fixed rate bonds, Floating rate/variable rate notes, Constant NAV money market funds (MMFs), Floating NAV money market funds (MMFs), Private placement fund, Tri-party repos, Treasury bill/notes (government debt), Separately managed accounts, and Short-term bond funds.
The FIS survey continues, "Over the next 12 months, how important will the following cash instrument types be in your portfolio? Certificates of deposit, Commercial paper, Deposits, Fixed rate bonds, Floating rate/variable rate notes, Constant NAV MMFs, Floating NAV MMFs, Private placement fund, Tri-party repos, Treasury bill/notes (government debt), Separately managed accounts, and Short-term bond funds."
They ask, "If you do not use money market funds, why is this? Not familiar with instrument, Not available in base/operating currency, Concerns over counterparty risk, Fees and gates, Floating NAV, Concerns over liquidity, Low yield compared with other instruments, and Other (please specify)."
Another question is: "How do you transact money market funds (MMFs)? Telephone, Standalone, proprietary bank portal(s), Proprietary bank portal(s) integrated with treasury management system, Third party portal, not integrated with treasury management system, Third party portal, integrated with treasury management system, and Other (please specify)." It adds, "If you currently use a MMF portal to transact business, what kind of functionality do you value most? Limits and compliance, Reporting, Research, Risk analysis, Trading, Integration, and Other (please specify)."
FIS writes, "With new regulations impacting U.S. domiciled prime and municipal MMFs in the fall of 2016, how is your use of these fund types likely to change?" Reponses include: "Decrease materially, Decrease a little, Remain unchanged, Increase a little, and Increase materially." They add, "If you answered 'decrease' to the question above, why is this? Investment policy limitations, Accounting concerns, Intraday liquidity concerns, Gates and fees, and Other (please specify)."
The Cash Investment Survey inquires, "What asset classes do you anticipate adding to your portfolio as an alternative to MMFs? (choose all that apply) Certificates of deposits, Commercial paper, Deposits, Fixed rate bond funds, Floating rate/variable rate notes, Money market funds, Separately managed accounts, Short-term bond funds, Private placement funds, Treasury bills/notes (government debt), Tri-party repo, and Other." It continues, "Based on the MMF changes highlighted above, at what spread would you considers shifting assets? (e.g. constant NAV to fluctuating or government to prime) 21–34 bps, 35–50 bps, or More than 50 bps."
Finally, the survey also asks, "How do you execute your time deposit transactions? What are your key criteria when placing a time deposit? And, if time deposit transactions could be placed automatically (with authorized banks and within credit limits), including integration with a treasury management system or another back office solution, would you be: More likely to use a cash management portal, Less likely to use a cash management portal, Would need more information to understand the opportunity, No impact on my decision."
