J.P. Morgan Asset Management, the second largest manager of U.S. money market mutual funds, yesterday announced the results of its "10th Annual Global Cash Management Survey." The survey, which polled "314 treasurers from around the world" and was conducted July through October 2008, "remains a benchmark for corporate treasurers and other cash investors to evaluate their liquidity management processes and understand their market position in relation to their peers," says the introduction from JPMAM's Head of Global Liquidity Robert Deutsch.
The report says, "Bank deposits remain the most commonly used investment type, although the allocation has come down from 61% in 2007 to 55%. There is, however, a high degree of regional disparity. US treasurers are the most likely to use pooled investments, with a 51% allocation to this investment type, compared to an all-region average of 32%. This is unsurprising given that US cash investors have traditionally used money market funds for their excess cash requirements rather than bank deposits."
It continues, "AAA rated money market funds continue to be the most widely used pooled vehicle, with 91% of respondents who invest in pooled funds having some allocation to them. This reflects the wide acceptance of money market funds as the most efficient vehicle for providing security, liquidity and competitive yield for risk averse investors. The use of all other pooled vehicles has declined. Enhanced yield fund usage, which fell in 2007, continued to decline, reflecting the flight to quality witnessed since the beginning of the credit crunch."
JPM explains, "By region, Western European treasurers are the least likely to use AAA rated money market funds, with 68% using them compared to the overall average of 91%. This may be due to the fact that in the large French and German liquidity markets, domestic funds have been preferred to international AAA rated funds. Money market funds are popular across all market capitalisations, although there is a size correlation: mega cap companies are slightly more likely than average to use money market funds (94%) while usage by smaller cap companies is slightly below average (86%).
The 2008 Survey continues, "The majority of treasurers who are considering using pooled instruments are looking at money market funds, with 61% weighing up this option. While only 12% of respondents currently use yield enhanced funds, another 37% of respondents are considering using them. However, last year, 39% of respondents said they were considering using yield enhanced funds, but actual use has decreased rather than increased. This perhaps suggests that treasurers would like to use yield enhanced funds to target higher yields, but that in the current market conditions they are more focused on the security offered by AAA rated funds."
Finally, J.P.Morgan Asset Management's "Global Cash Management Survey 2008" says, "Treasurers rated yield as most important when selecting either a money market fund or an enhanced yield fund. Notably, reputation/brand has moved into second place by mean score, from third place in 2007. This reflects the increased search for security, with treasurers perhaps looking for additional comfort beyond that offered by the AAA fund rating. Fees have become less significant, suggesting that treasurers may in some cases be willing to pay higher fees to invest with a more trusted provider."
