The Association for Financial Professionals, a group representing corporate treasurers, published its "2025 AFP Liquidity Survey" earlier this week. (See AFP's press release.) The cover letter says, "Invesco is once again proud to partner with the Association for Financial Professionals (AFP) to sponsor the 20th annual AFP Liquidity Survey Report. This marks the sixth year that Invesco has sponsored this industry-leading exploration into current and emerging corporate cash management trends." Invesco's Laurie Brignac explains, “As highlighted in this year's AFP survey, the U.S. economy continued to grow in 2024, inflation remained above the Federal Reserve's 2% target. and the Federal Open Market Committee (FOMC) took a pause after marginally loosening policy rates. Adding challenge and uncertainty, a new administration took center stage in the U.S. with an aggressive agenda including tariffs which increased market volatility at about the same time this annual AFP survey was in the field." (Note too: For those attending Money Fund Symposium next week (June 23-25) in Boston, we look forward to seeing you! Attendees and subscribers may access the conference materials via our "Money Fund Symposium 2025 Download Center.")
AFP's Introduction tells us, "To understand current and emerging trends in organizations' cash and short-term investment holdings, as well as investment policies and strategies in the current economic environment, the Association for Financial Professionals (AFP) conducted its 20th annual AFP Liquidity Survey in March 2025. The survey generated 254 responses, which are the basis of this report. AFP thanks Invesco for underwriting the 2025 AFP Liquidity Survey."
Discussing "Change in Cash and Short-Term Balances Over the Past 12 Months: U.S. and Non-U.S. Cash Holdings," the AFP says, "Thirty-eight percent of corporate practitioners report an increase in their organizations' cash holdings within the U.S. in the past 12 months (through March 2025) -- 6 percentage points lower than the 44% reported in the 2024 AFP Liquidity Survey Report. The share of those respondents reporting a decrease in their companies' cash holdings within the U.S increased by three percentage points -- from 13% in last year's survey to 16% in the current survey. These findings suggest organizations are holding onto their cash balances, although to a lesser extent than last year, or using those balances to support underlying business needs. Forty-six percent of respondents report that there was no significant change in their companies' cash and short-term balances within the U.S. over the past 12 months, similar to the 43% reported last year."
They write, "The distribution of organizations' cash and short-term balances outside the U.S. closely resembles the result in last year's survey. Sixty-five percent of respondents indicate that in the past 12 months their organizations' investments outside the U.S. were unchanged -- slightly higher than the 61% reported last year. Twenty percent report an increase in cash and short-term balances, lower than the 24% reported in last year's survey, while 15% of organizations decreased cash and short-term balances outside the U.S., identical to the figure in last year's report."
AFP's report continues, "Organizations are using similar strategies for both domestic and international cash holdings. Business leaders are taking a mixed approach. Survey results suggest the rate of holding onto cash balances is lower than last year; this could be due either to lower cash generation or because organizations reinvested in their companies due to a more favorable economic outlook last year. Cash holdings will be addressed in greater depth in the next section of the report."
The survey tells us, "Changes in cash holdings are driven by various factors. Seventy-four percent of respondents report that increased operating cash flow has had either a significant impact or some impact on the increase in their organizations' cash holdings in the past 12 months -- an 8-percentage-point decrease from the 82% in last year's survey. Other drivers contributing to increased cash holdings at organizations (each cited by 47% of respondents) include decreased capital expenditures, increased debt outstanding/ accessed best markets/securitization/factoring/supply-chain finance and paid back/retired debt/movement of debt/freed up cash flow. Forty-six percent of respondents note domestic political/regulatory risks (e.g., U.S. trade policy) a reason for the increase in their organizations' cash holdings, a 6-percentage-point increase from last year. This could be a consequence of the perceived optimism that the Trump administration policies would be more business-friendly, or a cash build-up due to uncertainty with the administration's plan for tariffs at the time the survey was being conducted."
It continues, "Additional drivers that have impacted the increase in organizations' cash holdings: Sale of company, business division; Business outlook, market uncertainty, market volatility. Fifty-eight percent of survey respondents report that inflationary impacts have had either a significant impact or some impact on the decrease in their organizations cash holdings in the past 12 months (ending in March 2025). Fifty-four percent indicate that increased capital expenditure has had either a significant impact or some impact on the decrease in cash holdings during the same time period. Other drivers contributing to decreased cash holdings at organizations include paid back/retired debt (cited by 47% of survey respondents) and decreased operating cash flow (44%)."
The survey says, "At the time the survey was in the field, survey respondents were exhibiting signs of tepid optimism: 54% of respondents cite increased capital expenditures as a reason for cash decreases, similar to the 52% who held this view in 2024. Additionally, 58% of respondents believe that the impact of inflationary pressures will decrease cash holdings, a figure unchanged from last year. The new administration had yet to roll out any trade policies or issue concrete directives, and persistent inflation continued (and continues) to be on practitioners' radars."
It comments, "Slightly less than half of respondents (47%) anticipates that their organizations' current cash and short-term investment holdings will remain the same during the second and third quarters of 2025 (i.e., April 2025 through September 2025). Thirty-two percent of respondents expect that their companies' current cash and short-term investment holdings will increase, while 21% predict a decrease in the second and third quarters of 2025. High interest rates, impending tariffs, a volatile stock market and tremendous uncertainty in the economy are likely driving organizations to build their cash and short-term investment holdings."
A section titled, "Current Allocations of Short-Term Investments," tells us, "Companies maintain their investments in relatively few vehicles. Organizations invest in an average 2.57 vehicles for their cash and short-term investments -- slightly lower than the 2.7 average reported in 2024. Most organizations continue to allocate a large share of their short-term investment balances -- an average of 80% -- in safe and liquid investment vehicles: bank deposits, money market funds (MMFs) and Treasury securities. This result is three percentage points lower than the 83% reported in 2024. The typical organization currently maintains 46% of its short-term investments in bank deposits. This allocation is one percentage point lower than last year (2024) but is 9 percentage points lower than the 55% reported in 2022, and lower than both the 52% reported in 2021 and the 51% in 2020. This year's (2025) allocation is similar to percentages reported in 2019 (46%)."
It continues, "Current allocations in Government/Treasury money market mutual funds at 20.4% is an increase of 0.6 percentage points from the figure reported in 2024. The allocation is highest for publicly held companies -- at 26.1% -- than for other organizations. Investment allocations to Treasury securities (including bills, notes and bonds) are 8.7%, lower than the 12.4% reported in 2024. This allocation is more common for companies with annual revenue less than $1 billion, and for those that are net investors and investment grade than for other organizations. Overall, as deposits remained stable, allocations to Government/Treasury money funds, commercial paper, Prime/diversified money market mutual funds increased, while allocations in Treasury securities decreased."
Finally, AFP adds, "Shifting away from direct purchases of Treasury-related securities may signal a desire to diversify allocations through more streamlined investment approaches. This shift could be driven by efforts to automate treasury processes, reducing costs and freeing up time for other strategic initiatives. These shifts in investment vehicles signal that organizations continue to be cautious and are leaning towards allocating their investments in those vehicles which offer stability and safety."
