We wrote last week on the "2025 AFP Liquidity Survey." (See our June 20 News, "AFP 2025 Liquidity Survey: MMFs Inch Higher; Deposits, T-Bills Lower.") Today, we continue our excerpts from the annual survey of corporate investors' cash habits. Discussing "Current Allocations of Short-Term Investments," AFP says, "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%)." (Note: Thanks to those who attended our Money Fund Symposium in Boston! Attendees and Crane Data Subscribers may access the MFS Conference Materials here.)
AFP writes, "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.... 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."
They say, "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."
A section on "Money Market Funds," tells us, "Various drivers play a role in the selection of money market funds. The three factors that play the most important role are fund ratings, yield and stable NAV. Sixty-nine percent of treasury and finance professionals cite fund ratings as a primary driver (among the top three drivers), while 68% cite yield and 72% cite fees as having a significant role when selecting a mutual fund. One of the significant shifts seen in the 2024 AFP Liquidity Survey results was the market's transition away from Prime funds which have a floating NAV. Stable NAV ranks as the third most influential factor in this year's survey, mirroring the trend seen in 2023 when the SEC announced liquidity fees, which took effect in 2025."
It continues, "Thirty-eight percent of respondents expect that, with the advent of real-time payments, the money market industry will provide 24/7 liquidity -- lower than the 40% who expressed this view in the 2024 survey. Thirty-three percent of respondents are unsure if real-time payments operating in a 24/7 environment will require the money market industry to provide 24/7 liquidity. Confidence in the money market industry's ability to provide 24/7 liquidity has declined compared to previous years surveys, particularly due to the challenges of implementing swing pricing for NAVs, which proved too complex for widespread adoption. Dependence on real-time liquidity will likely require underlying payment rails capable of supporting instant transfers of securities and dollar flows -- capabilities that are not yet fully developed."
They write, "Nearly 90% of respondents report that their organizations would select real-time money market funds and 73% would choose real-time investment sweeps if those options fit within the parameters of their companies investment policies. Real-time earnings credit rates and real-time investment options to 'follow the sun' are less likely preferred choices for organizations when selecting investment vehicles (cited by 53% and 18% of respondents, respectively). A larger share of respondents from organizations that are net investors than those that are net borrowers select a real-time money market fund as an investment vehicle of choice (93% compared to 86%)."
AFP's survey adds, "Money market funds and investment sweeps are currently offered. Adding real-time capabilities, though new, might be easier to understand than real-time earnings credit rates, and might operate as efficiently as real-time investment options in following the sun. Currently there is greater uncertainty as to the timing to achieve real-time liquidity. There will be reliance on the Federal Reserve to provide the underlying infrastructure to help the market be prepared."
It states, "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). The share of those respondents reporting a decrease in their companies' cash holdings within the U.S increased by three percentage points -- to 16% in this year's survey. Sixty-five percent of respondents say that in the past 12 months their organizations investments outside the U.S. were unchanged, while 20% report an increase in cash and short-term balances. Nearly two-thirds of organizations hold some amount of cash outside of the U.S."
AFP states, "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. The typical organization currently maintains 46% of its short-term investments in bank deposits."
They add, "Banks continue to be major depositories for companies' U.S.-based cash and short-term investment holdings. This year's survey results show that the percentage of cash and short-term investments being held currently at banks at 46% is very similar to the 47% reported in 2024. Most respondents, 84%, consider their organizations' overall relationship with their banks to be a significant determinant in bank selection, while 52% of financial professionals say that the credit quality of a bank is a deciding factor."
Finally, the survey says, "The three factors that play the most important role in the selection of money market funds are fund ratings, yield and stable NAV. Thirty-eight percent of respondents expect that with the advent of real-time payments, the money market industry will provide 24/7 liquidity, while 33% of respondents are unsure if real-time payments operating in a 24/7 environment will require the money market industry to provide 24/7 liquidity. This year's survey findings suggest that business leaders continue to be cautious but exhibit signs of tepid optimism when making decisions regarding managing their organization's cash and short-term investments."
