J.P. Morgan Asset Management recently released the results of its latest "Global Cash Management Survey," which shows that North American corporate treasurers allocate more surplus cash to money market funds (41%) than to bank deposits (35%), while European and Asian treasurers allocate more cash to bank deposits (58%). The J.P. Morgan Asset Management Global Cash Management Survey 2010 also shows access to daily liquidity, bank relationships, reputation/brand, and yield were the most important factors in selecting fund providers.
JPMAM Head of Global Liquidity Robert Deutsch comments in the survey introduction, "[T]he J.P. Morgan Global Cash Management Survey 2010 ... has provided an unbroken global benchmark for corporate treasurers every year since its launch in 1999. The 2010 survey is the most comprehensive yet, with a record 427 treasurers from around the world providing their views by online questionnaire between July and September.... [T]he strong response rate has helped uncover some particularly interesting cash management trends as the world continues to recover from the financial crisis and corporate balance sheets continue to strengthen.... As would be expected given the pre-eminence of the US economy and US companies, North American respondents made up the biggest group, but the survey also attracted significant responses from treasurers in Europe and Asia.... With its record response rate and broad coverage, the 2010 survey represents a global analysis of the cash management industry and provides a valuable reference resource for all corporate treasurers."
The Survey's "Executive summary" explains, "The repercussions of the financial crisis continue to be felt in treasury departments. Although extreme risk aversion is beginning to recede, the survey suggests that the lessons of the financial crisis will not be easily forgotten. Amid the severe dislocation of credit markets and the high profile banking failures experienced during the financial crisis, liquidity became paramount for corporate treasurers. In the 2009 survey, when treasurers were asked about concerns in their treasury department, liquidity was the most commonly cited response, and a year on, it remains the biggest concern."
It continues, "Treasurers also continue to focus on counterparty risk. Among the criteria treasurers use to select a primary bank, the bank's financial strength gained in importance for a second consecutive year, now ranking almost equally with the quality of relationship management and customer service. When selecting a pooled investment, too, the financial strength of the provider has become more important to treasurers. However, while liquidity and security undoubtedly remain the highest priorities, treasurers' priorities are gradually evolving as corporate balance sheets recover from the crisis. The survey pointed to the beginnings of a recovery in risk appetite, and suggested that after two years of very low yields, treasurers may be starting to look for improved returns from their cash investments."
The survey also says of its other key findings: "Liquidity remains a concern – Liquidity is the biggest concern in treasury departments today, and was also cited as the most important factor when selecting pooled investments from an asset management firm and the largest consideration for those who segment their surplus cash. Cash management is in focus – As a result of the deleveraging process many organisations have completed, treasurers have more surplus cash than they did in 2009.... Banking relationships are increasing – Treasurers increased their number of banking relationships again in 2010.... Bank deposits are still favoured by treasurers in EMEA and Asia – Despite the impact of the financial crisis on confidence in the banking system, bank deposits are the preferred cash management vehicle overall, and remain the most used vehicle among treasurers in EMEA and Asia. Treasurers in the US continue to favour money market funds – Treasurers in the US are most likely to use money market funds to manage their surplus cash, and less likely to use bank deposits.... Risk appetite is gradually beginning to return – ... After a prolonged period of very low returns on cash, treasurers are also beginning to look for higher yield, although they remain largely unwilling to take on higher risk in order to achieve it."
The JPM Global Cash Survey comments, "Among treasurers who use or are considering pooled instruments for their cash management, an emphasis on liquidity and credit quality is evident. Prime money market funds (AAA-rated stable value funds) are the most popular pooled vehicle, with over three quarters of treasurers either using them or considering doing so. Almost 70% of treasurers either use or are considering using Treasury money market funds (AAA-rated stable value funds that invest only in government securities). Prime money market funds were already the most popular in 2009's survey, but take-up has increased significantly over the past year, with 59% now using them, compared to 47% in 2009. Take-up of Treasury money market funds has also increased significantly. Growth has been driven by Asia (up from 21% in 2009 to 39% in 2010) and EMEA (up from 15% in 2009 to 43% in 2010)."
Finally, the survey adds, "The criteria treasurers use to select a pooled instrument reflect the emphasis on liquidity and security seen throughout this year's survey. In 2008, treasurers rated yield as the most important factor when selecting a money market fund, but in 2009 yield fell to second place, behind liquidity. In 2010, bank relationship and reputation/brand also overtook yield, moving up into second and third places, as treasury departments increased their focus on counterparty risk."
